When it comes to the broad-based emerging-markets equity ETFs, Vanguard’s MSCI Emerging Markets ETF (VWO) is clearly the top dog. As of December 11, VWO had a market cap of $58.66 billion and an average daily volume of 17.74 million shares.

But back on October 2, Vanguard rocked the ETF world when it said it would drop MSCI of New York City as its index provider on 22 ETFs and substitute two other index providers, in the belief that by doing so, it could achieve “considerable savings for the funds’ shareholders over time.” That includes VWO, which will transition to a FTSE index at some unspecified point next year. Vanguard has been deliberately vague about any sort of schedule.

“We’re not saying exactly when the transitions will begin in order to prevent front-running,” says Joel Dickson, a senior investment strategist and principal in Vanguard’s Investment Strategy Group in Malvern, Pennsylvania. “The transitions will be staggered over several months,” he says, noting that VWO “will take longer than the other funds because it will be divesting all of its holdings in South Korea and investing the proceeds in some markets that are less liquid.”

And VWO’s exposure to South Korea is the problem. As of its latest statement on October 31, VWO had a 15.3 percent weighting in South Korea, including its No. 1 stock holding, Samsung Electronics. And that entire position will have to be eliminated when VWO moves from the MSCI index to the FTSE index.

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