Money Surges into APAC ETFs as Investors Diversify

Some investors are taking a gap year from the S&P to explore Asia. 

Net flows into US-listed Asia-Pacific ETFs surpassed $15 billion through the end of September, a sharp increase from the $5 billion they took in during the whole of 2025, according to Morningstar data. Emerging markets have outperformed the S&P 500 for the past two years and have returned nearly 17% to the S&P’s 11% so far this year, and investors are thinking hard about diversifying. 

“There’s two layers of the diversification story,” said Anthony Caruso, head of ETFs at Nomura Asset Management. The outperformance of emerging markets signals an attractive opportunity to diversify away from the Magnificent 7, he said, but APAC ETFs additionally offer investors the ability to spread their AI exposure across the global supply chain. 

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Asia’s AI supply chain and the subsequent explosion of ETFs like the Roundhill Memory ETF (DRAM) are creating significantly more opportunities for issuers to explore specialized ETFs in this market, said Chris Mullen, senior vice president of derivatives trading at Tidal Financial Group. “Everyone wants to catch lightning, and so they’re seeing other opportunities, specifically in Asia,” Mullen said. “We’ve seen an explosion of ETF baskets and ETF funds specifically created around Asian names.”

A recent survey from William Blair Investment Management sheds more light on the trend: 

• Active ETFs seem to be advisors’ preferred vehicle for gaining exposure to international and emerging markets, as 56% of RIAs said they expect to increase their allocations in the next year. 
• When asked which markets offer the strongest investment opportunities, 77% of RIAs choose at least one Asian market, led by China (28%), Japan (24%) and India (17%).

Eat, Pray, Allocate: Despite the growing popularity of this ETF category, managing the funds themselves can be challenging for issuers. “You need to make sure you have a tight bid-ask spread, but also you need to find a lead market maker to be able to host it for you,” which isn’t always possible, Mullen said. Plus, the time difference means that everything is trading overnight. “No one’s on the desk to help there, so we have to fair value a lot,” or estimate what holdings are worth without live pricing, Mullen said. “From A to B, there is a very large barrier of entry. However, I think with each fund we launch, it opens up more doors, and it continues to make the process easier.”