What Is the EAFE Index?
The EAFE Index is a stock index offered by MSCI that covers non-U.S. also, Canadian equity markets. It fills in as a performance benchmark for the major international equity markets as addressed by 21 major MSCI indices from Europe, Australasia, and the Middle East.
The EAFE Index is the most seasoned international stock index and is usually called the MSCI EAFE Index.
Understanding the EAFE Index
The EAFE Index was made to mirror the performance of mid-and huge cap stocks across 21 developed market countries — the Europe, Australasia, and the Far East (EAFE). The index was developed by Morgan Stanley Capital International (MSCI) in 1969 and records in excess of 874 stocks from 21 countries in the EAFE. As of June 30, 2021, the rundown of countries by region are given in the table below:
|MSCI EAFE Index Countries|
As of June 30, 2021, equities from the Japanese stock markets accounted for the index's biggest allocation at 23.19%. The best four countries in the EAFE Index, following Japan, incorporate the United Kingdom (14.38%), France (11.52%), Switzerland (9.8%), and Germany (9.41%).
The best 10 company postings on the index were:
- ASML Holdings
- Roche Holding Genuss
- LVMH Moet Hennessy
- AIA Group
These companies account for $2.13 trillion in market-cap value, or 12.55%, of the index's market capitalization.
The financial sector of the EAFE has the highest weighting in the index. The table below shows the sectors addressed in the MSCI EAFE Index and their separate loads:
|MSCI EAFE Index Sectors|
Another index, developed by MSCI Inc., which addresses the performance of the global market is the MSCI ACWI (All Country World Index). The ACWI records 2,491 assets from 47 countries made out of 23 developed countries and 24 emerging economies. Both indices give a transparent vehicle that can be utilized by institutional investors to exploit profitable investments from different capital markets in the world. In comparison, the table below shows the annual performance of both indices from 2007 to 2020:
|Annual Performance (%)|
|Year||MSCI EAFE||MSCI ACWI|
Institutional investors and asset managers utilize the EAFE index as a performance benchmark for the international developed equity market. By contrasting the performance of funds with that of the EAFE Index, a manager can determine whether they are adding value to their clients' portfolios. Investors and portfolio managers who need an increased level of diversification past the U.S. furthermore, Canadian equity lines can remember stocks from the EAFE for their portfolios. This should commonly be possible by purchasing index-linked financial products, for example, exchange-traded funds (ETFs).
An illustration of an ETF that tracks the investment consequences of the EAFE Index is the iShares MSCI EAFE ETF (EFA). The EFA has net assets of $57.2 billion with a 0.32% expense ratio, as of July 2021. Different ETFs that mirror the performance of the EAFE Index are iShares Core MSCI EAFE (IEFA) and the iShares MSCI EAFE Small-Cap (SCZ) ETFs.
- Developed by Morgan Stanley Capital International (MSCI) in 1969, the EAFE Index contains in excess of 900 stocks from 21 countries.
- Investors and asset managers frequently utilize the EAFE Index as a performance benchmark for global developed market equities.
- The EAFE is a broad market index of stocks situated inside countries in Europe, Australasia, and the Middle East.