Investors looking for exposure to developing economies are increasingly pivoting toward “ex-China” strategies, a trend that has yielded significant performance premiums compared to the S&P 500 so far in 2026. By systematically excluding Chinese equities, these specialized exchange-traded funds (ETFs) have redirected capital toward markets in Taiwan, India, and South Korea, which have recently demonstrated stronger growth dynamics.
As of early 2026, three prominent funds—the iShares MSCI Emerging Markets ex China ETF (EMXC), the Freedom 100 Emerging Markets ETF (FRDM), and the Columbia EM Core ex-China ETF (XCEM)—have each posted gains exceeding 35% year-to-date. In contrast, the S&P 500 has recorded a gain of approximately 9% over the same period, leaving a performance gap of roughly 30 percentage points.
The Strategic Pivot Away from China
Traditional emerging market benchmarks typically allocate nearly 30% of their weight to China. Consequently, broad-based EM portfolios are often heavily influenced by shifts in Chinese market sentiment and domestic economic policy. By removing this weighting, the “ex-China” funds allow investors to gain exposure to developing markets that have exhibited different growth patterns, particularly in the semiconductor, technology, and consumer sectors.
Performance data from 2025 highlighted the volatility and dispersion within these regions. While India experienced a complex year, markets such as South Korea and South Africa saw significant gains, providing a tailwind for funds that could lean into those specific geographic allocations.
Comparing the Vehicles
While all three funds share the goal of isolating non-Chinese growth, they utilize distinct methodologies:
- iShares MSCI Emerging Markets ex China ETF (EMXC): As the largest fund in this cohort, EMXC serves as the institutional standard. It maintains a cap-weighted approach, offering broad exposure with a competitive expense ratio of 0.25%. Its top holdings are heavily concentrated in the Taiwan and South Korea chip complexes, as well as major private-sector firms in India.
- Freedom 100 Emerging Markets ETF (FRDM): This fund employs a unique “freedom screen,” which excludes markets based on civil liberties and rule-of-law metrics. This approach filters out authoritarian regimes, resulting in a distinct country mix that often overweights countries like Taiwan, Poland, and Chile. The fund carries a higher expense ratio of 0.49% to account for its active screening methodology.
- Columbia EM Core ex-China ETF (XCEM): XCEM utilizes a proprietary index methodology that differentiates it from the standard MSCI framework. It is often utilized by allocators as a secondary sleeve to provide non-overlapping exposure alongside larger, cap-weighted funds like EMXC.
Market Implications
The success of these ETFs reflects a broader shift in how global allocators view emerging market risk. Rather than treating developing nations as a monolithic block, investors are increasingly opting to prune specific geographic exposures. However, analysts note that these strategies are not without risk; the concentration in specific sectors—particularly semiconductors—means that these funds can experience significant volatility if the tech cycle shifts. Furthermore, liquidity varies across these funds, with larger vehicles like EMXC generally offering tighter bid-ask spreads compared to smaller, niche alternatives.
