Institutional Investor Exits Emerging-Markets ETF After Big Rally — Here's What to Know

Adventist Health System West sold out its entire position in the iShares MSCI Emerging Markets ex China ETF (EMXC), according to an SEC filing released on Tuesday.

What Happened

According to a filing with the Securities and Exchange Commission on Tuesday, Adventist Health System West liquidated its entire holding in the iShares MSCI Emerging Markets ex China ETF (NASDAQ:EMXC) during the third quarter. The fund sold 837,660 shares, with an estimated $52.9 million.

What Else to Know

Top holdings after the filing:

• NYSEMKT:VOO: $300.4 million (48.9% of AUM)
• NYSEMKT:VEA: $67.8 million (11% of AUM)
• NYSEMKT:ITOT: $67.1 million (10.9% of AUM)
• NASDAQ:VONV: $61.9 million (10.1% of AUM)
• NASDAQ:VTIP: $38.8 million (6.3% of AUM)

As of Thursday, EMXC shares were priced at $71.08, up 18.5% over the past year, compared to a 16% increase for the S&P 500.

ETF Overview

ETF Snapshot

• Investment strategy: EMXC seeks to track the performance of the MSCI Emerging Markets ex China Index, focusing on large- and mid-cap equities across 26 emerging markets, while excluding China exposure.
• Underlying holdings: Portfolio is diversified across multiple sectors and countries, with at least 80% of assets invested in index constituents and up to 20% in derivatives and cash equivalents.
• Expense ratio and fund structure: The fund is structured as an open-ended ETF, offering a transparent, rules-based approach to emerging markets equities.

The iShares MSCI Emerging Markets ex China ETF provides investors with targeted exposure to emerging market equities while deliberately excluding Chinese securities, allowing for more precise regional allocation. The fund leverages a free float-adjusted, market capitalization-weighted index methodology to ensure broad and representative coverage of emerging economies outside China.

Foolish Take

Adventist Health System’s full exit from the iShares MSCI Emerging Markets ex China ETF (EMXC) might signal a clear reallocation toward broader international diversification after strong emerging-market gains this year. The nonprofit health network, which manages about $600 million in reportable equity assets, sold roughly $52.9 million worth of EMXC shares in the third quarter while simultaneously opening a new $38 million position in the iShares Core MSCI Total International Stock ETF, a shift toward developed-market exposure and wider geographic balance.

Adventist’s investment arm plays a key role in supporting its $6 billion (revenue) health-care system, which operates hospitals and clinics across the West Coast and Hawaii on a nonprofit basis. The decision to exit EMXC likely reflects portfolio consolidation and risk moderation, as the ETF—up nearly 19% over the past year—is heavily concentrated in Asian stocks that have performed very well over the past year, with top holding Taiwan Semiconductor, for example, up more than 46%.

For long-term investors, Adventist’s move highlights the value of diversification after a strong rebound. With the fund trading near all-time highs and broader international equities still lagging U.S. markets, reallocating toward global core exposure could help smooth returns through the next market cycle.

Glossary

13F reportable assets: Assets that institutional investment managers must report quarterly to the SEC, disclosing certain equity holdings.
Assets under management (AUM): The total market value of investments managed on behalf of clients by a fund or firm.
ETF (Exchange-Traded Fund): An investment fund traded on stock exchanges, holding a basket of assets like stocks or bonds.
Liquidated: The process of selling all holdings in a particular investment, resulting in a zero position.
Alpha: A measure of an investment's performance compared to a benchmark, indicating value added or subtracted by active management.
Dividend yield: The annual dividend income from an investment, expressed as a percentage of its current price.
Total return: The investment's price change plus all dividends and distributions, assuming those payouts are reinvested.
Expense ratio: The annual fee, as a percentage of assets, that a fund charges to cover operating costs.
Open-ended ETF: A fund structure allowing unlimited creation or redemption of shares based on investor demand.
Free float-adjusted: An index weighting method that only considers shares available for public trading, excluding insider or government holdings.
Market capitalization-weighted index: An index where each component is weighted according to its total market value.
Derivatives: Financial contracts whose value is derived from underlying assets like stocks, bonds, or indices.

Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard FTSE Developed Markets ETF and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.