ETF Prime: Islam Analyzes International ETFs

There’s a disconnect between performance and flows. 

The iShares Core MSCI EAFE ETF (IEFA A) and the iShares Core MSCI Emerging Markets ETF (IEMG A) are offering around 10%-15% outperformance over U.S. ETFs year to date; however, U.S. equity ETFs are still seeing all the flows. 

The Vanguard Total Stock Market ETF (VTI A), the SPDR Portfolio S&P 500 ETF (SPLG A), the Vanguard Growth ETF (VUG A-), the Invesco NASDAQ 100 ETF (QQQM B)), and the JPMorgan NASDAQ Equity Premium Income ETF (JEPQ A+) are among top ETFs by year to date flows. 

“It’s a little bit psychological, right?” Islam said. “We depended on these U.S. stocks for so long, especially large-cap tech. And many investors were able to get away with just having that domestic exposure [over the past few years].”

Seeing the pullback from U.S. large-cap stocks this year was a shock to many investors, Islam said. This has caused many investors to need to rethink portfolio allocations, and perhaps finally add a diversifier. 

While there has been a mismatch between performance and flows all year in international ETFs, flows are typically late to follow performance, she noted. Furthermore, flows into international ETFs have improved as the year has gone on. But they’ve been overshadowed by even stronger flows into domestic funds.

Notably, the top-performing single-country ETFs are all in Europe this year. 

The iShares MSCI Poland ETF (EPOL C) has been consistently in the top 10 ETFs by performance this year and is up almost 50% YTD. 

“It’s an interesting story because I think Poland is not really a country many of us have thought about a lot,” Islam said. “It is a relatively small market. It’s sort of a blend of emerging and developed. But it’s become more popular because it does have some economic and political stability.”

Germany ETFs are another bright spot, with these products up about 30%-35% year to date. The fund currently leading by pack by performance is First Trust Germany AlphaDEX Fund (FGM C). 

Finally, Spain is another interesting play, flagged by Islam. The iShares MSCI Spain ETF (EWP B+) is up around 30% year to date. 

“Spain is very interesting because it’s known for its rapidly improving infrastructure,” Islam said. “So it’s been an overall strong economy, and I think one that investors are pretty interested in.”

Europe-based ETFs tend to be heavily exposed to financials and defense names, complementing equity ETFs’ larger exposure to tech names. 

Islam called out two European sector ETFs that have performed well in 2025 to date. They are the Select STOXX Europe Aerospace & Defense ETF (EUAD) and the iShares MSCI Europe Financials ETF (EUFN B).

EUAD just recently launched in late 2024 and is up over 50% this year. The fund has been propelled by recent geopolitical tensions and increased defense spending, Islam said. “That increase in defense spending is somewhat of a long term tail wind,” she added.

While the iShares European Financial ETF has been around for a while, interest in that sector has been growing. EUFN is up around 30% so far this year, per Islam.

Notably, while Europe is known for having a strong financial sector, it tends to be underweighted in a global financial ETF. Therefore, a fund like EUFN can provide more specific exposure.

ETF marketing has transformed from a “nice to have” to a critical business function. Levis discussed how the industry has evolved in the past 15 years and lessons that asset managers have learned. 

“I think everybody at this point is on board with the fact that marketing is absolutely integral to the entire operation, to the entire ecosystem,” she added. “The overall strategy of raising awareness hasn’t changed in all this time, but definitely the tactics of today are a lot more refined and technologically advanced than they were 15 years ago.”

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