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MSCI EAFE

The MSCI EAFE Index is a free float-adjusted market capitalization equity index that captures large- and mid-cap representation across 21 developed markets countries around the world, excluding the United States and Canada.^[1] It serves as a benchmark for international equity investments, focusing on regions in Europe, Australasia, and the Far East—regions for which the acronym "EAFE" stands.^[2] Launched on March 31, 1986, the index has become a widely recognized standard for measuring the performance of developed international markets outside North America, with historical data available through back-testing prior to its inception.^[3] As of October 31, 2025, it includes 693 constituents, covering approximately 85% of the free float-adjusted market capitalization in each constituent country, and has a total market capitalization of $19.55 trillion.^[1] The countries represented are Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.^[3] The index is calculated in multiple currencies, including USD and local currencies, and is available in gross and net total return versions, with key valuation metrics as of late 2025 including a price-to-earnings ratio of 17.13, a forward P/E of 15.20, a price-to-book value of 2.11, and a dividend yield of 2.86%.^[1] It does not incorporate specific ESG objectives but is part of MSCI's broader suite of developed markets indexes, which are used by investors for benchmarking, index-linked products, and portfolio construction.^[4]

Introduction

Definition and Purpose

The MSCI EAFE Index, which stands for Morgan Stanley Capital International Europe, Australasia, and Far East, is a free float-adjusted market capitalization-weighted equity index that tracks the performance of large- and mid-cap stocks across 21 developed markets, excluding the United States and Canada.^[1] It serves as a key benchmark for investors seeking exposure to international developed market equities outside North America, capturing approximately 85% of the free float-adjusted market capitalization in each of these markets.^[5] The primary purpose of the MSCI EAFE Index is to provide a standardized measure of equity market performance in established economies spanning Europe, Australasia, and the Far East, enabling portfolio diversification and assessment of global growth opportunities beyond domestic markets.^[2] By focusing on developed markets, it helps institutional and retail investors evaluate the relative performance of international holdings against a broad, representative basket of securities, often used in the construction of mutual funds, ETFs, and other investment vehicles.^[1] First publicly available in 1986, the index has been calculated with back-tested data dating back to December 31, 1969, establishing it as the oldest international stock market index.^[1] As of October 31, 2025, it comprises 693 constituents with a total free float-adjusted market capitalization of approximately $19.8 trillion.^[5]

History

The MSCI EAFE index originated in the late 1960s as part of Morgan Stanley's efforts to develop international equity benchmarks amid increasing global capital flows following the Bretton Woods system's collapse, which facilitated greater cross-border investments. Capital International S.A., a subsidiary of The Capital Group Companies, began calculating international indexes in 1968, with Morgan Stanley publishing them starting in 1969. The index was first calculated with a base value of 100 as of December 31, 1969, providing a standardized measure for developed markets outside the U.S. and Canada.^[6]^[1] In 1986, Morgan Stanley acquired full licensing rights to the indexes from Capital International and rebranded them as Morgan Stanley Capital International (MSCI) indexes, solidifying the provider's role in global indexing. This renaming marked the formal launch of the MSCI EAFE index on March 31, 1986, though historical data extended back to 1969 via back-testing. A significant methodological evolution occurred in 2001 with the introduction of the Enhanced Index Methodology, which incorporated free float-adjustment to better reflect investable market opportunities by excluding closely held shares from market capitalization weights and increased coverage to approximately 85% of the free float-adjusted market capitalization in each market, thereby including greater mid-cap representation; this change was implemented in phases starting November 30, 2001.^[7]^[8] Over the decades, the index expanded from its initial focus on approximately 15 countries to 21 developed markets, incorporating additions like Israel, which was reclassified from emerging to developed status and included in May 2010 to align with its economic maturity.^[9] These expansions responded to evolving global market structures, ensuring the benchmark captured a more comprehensive view of international equities. Methodology refinements, such as the free float adjustments, also aimed to improve stability during volatile periods, including the 1987 market crash and the 2008 financial crisis, by promoting more accurate investability measures. In 2007, MSCI Inc. was spun off from Morgan Stanley through an initial public offering, becoming an independent entity while preserving the index's status as a leading global benchmark.^[10]

Index Composition

Eligible Countries

The MSCI EAFE Index comprises 21 developed market countries, selected based on MSCI's rigorous classification framework that evaluates economic development, market size and liquidity, and accessibility to foreign investors. These countries are: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.^[3] To qualify as developed, a market must demonstrate sustained economic development, such as a gross national income (GNI) per capita at least 25% above the World Bank's high-income threshold (USD 14,005 in 2023) for three consecutive years; adequate size and liquidity, including at least five securities meeting minimum full market capitalization (USD 5,928 million), float-adjusted market capitalization (USD 2,964 million), and annual traded value ratio (20%); and high market accessibility, characterized by very high openness to foreign ownership, ease of capital flows, operational efficiency, availability of investment instruments, and institutional stability.^[11] Additionally, eligible securities within these countries must exhibit sufficient free float, generally at least 15% of shares available to international investors, ensuring broad market representation.^[12] These countries reflect diverse economic profiles that underscore the index's focus on mature, stable markets outside North America. Japan, the largest weighting at 22.82% as of October 31, 2025, dominates through its advanced technology sector and manufacturing prowess, contributing significantly to global innovation in electronics, automobiles, and robotics.^[3] The United Kingdom, at 14.78%, serves as a premier financial services hub, with London's role as a global banking and insurance center driving its economic influence.^[3] Australia, with its commodity-driven economy centered on mining, energy exports, and agriculture, exemplifies resource-rich stability in the Australasia region. France and Germany, weighting 10.89% and 9.55% respectively, bolster Europe's industrial and luxury goods sectors, with France emphasizing aerospace, tourism, and consumer products, while Germany leads in engineering, chemicals, and automotive manufacturing.^[3] The top five countries—Japan, the United Kingdom, France, Switzerland (9.26%), and Germany—collectively account for approximately 67% of the index's total weight, highlighting concentrated exposure to key economic powerhouses.^[3] Regionally, the index emphasizes Europe, which constitutes the majority of its composition at around 65%, encompassing financial, industrial, and consumer-driven economies across the continent. The Far East and Australasia regions together represent about 35%, driven primarily by Japan's technological edge and Australia's resource exports, providing diversification through Asia-Pacific growth dynamics.^[3] Historically, the list has evolved; for instance, Greece was included from 2001 until its removal in November 2013, following MSCI's reclassification to emerging market status due to diminished investor accessibility, liquidity constraints, and market size amid economic challenges.^[13] This adjustment ensured the index maintained focus on robust, developed markets with high free float-adjusted market capitalization coverage, typically around 85% per country.^[12]

Security Selection and Sectors

The MSCI EAFE Index selects securities from developed markets excluding the United States and Canada, focusing on large- and mid-cap equities that meet stringent eligibility criteria to ensure investability and liquidity.^[14] To qualify, a security must have a minimum free float-adjusted market capitalization representing at least 50% of the equity universe minimum size requirement, with a foreign inclusion factor of at least 15%.^[14] Liquidity is assessed via the Annualized Traded Value Ratio (ATVR), requiring at least 20% for both 12-month and 3-month periods, alongside a 90% trading frequency.^[14] The index targets the top 85% of free float-adjusted market capitalization in each eligible country, classifying securities as large-cap (those exceeding 1.5 times the standard market cap cutoff) or mid-cap (the segment between large and small caps), while excluding small-caps, REITs in applicable markets, derivatives, mutual funds, and ETFs.^[14] As of October 2025, the index comprises 693 constituents, with 275 classified as large-cap (approximately 40%) and 418 as mid-cap (approximately 60%), providing broad representation of the targeted market segments.^[15]^[16] Securities are classified into sectors using the Global Industry Classification Standard (GICS), which organizes them into 11 sectors, 25 industry groups, and further subcategories to reflect economic similarities and investment characteristics.^[14] The sectoral composition emphasizes diversified exposure across developed markets, with financials leading at 24.09%, followed by industrials at 19.38%, health care at 10.89%, consumer discretionary at 10.11%, and information technology at 8.85%; other sectors include consumer staples (7.49%), materials (5.59%), communication services (4.95%), utilities (3.57%), energy (3.24%), and real estate (1.84%).^[15] Representative holdings illustrate this breakdown, such as Nestlé from Switzerland in consumer staples and Toyota from Japan in consumer discretionary, alongside prominent large-cap names like ASML Holding from the Netherlands in information technology (2.11% weight) and AstraZeneca from the United Kingdom in health care (1.28% weight).^[15] To promote balance and reduce concentration risk, the index imposes diversification caps, limiting any single country's aggregate weight to 25%, applied during construction and rebalancing.^[14]

Construction and Methodology

Weighting and Calculation

The MSCI EAFE Index employs a free float-adjusted market capitalization weighting method, where the weight of each constituent security is determined by its free float-adjusted market capitalization relative to the aggregate free float-adjusted market capitalization of all index constituents.^[17] The free float adjustment accounts for the proportion of shares available for public trading, incorporating the Foreign Inclusion Factor (FIF), which estimates the free float available to international investors and is rounded to the nearest 5% for values above 15% or 1% for values below 15%.^[17] Specifically, the weight w_i for security i is calculated as:

w_i = \left( \frac{ \text{Free Float-Adjusted Market Cap}_i }{ \sum \text{Free Float-Adjusted Market Cap} } \right) \times 100

where the free float-adjusted market capitalization is the product of the security's price, shares outstanding, and FIF.^[17] The index level is computed using the free float-adjusted market capitalization approach, aggregating the adjusted market values of all constituents and dividing by a divisor to ensure continuity. The formula for the price index level in USD is:

\text{Index Level}_t = \frac{ \sum_{i=1}^N \left( (P_{i,t} \times S_{i,t} \times \text{FFAF}_{i,t}) / \text{FX Rate}_{i,t} \right) }{ D_t }

where P_{i,t} is the price of security i at time t, S_{i,t} is the number of shares outstanding, \text{FFAF}_{i,t} is the free float adjustment factor (incorporating FIF), D_t is the divisor, and \text{FX Rate}_{i,t} converts the local currency value of each security to USD; for intraday calculations, prices are interpolated, but end-of-day values use official exchange closing prices.^[18] The divisor D_t is adjusted for corporate actions such as stock splits, dividends, rights issues, and spin-offs to prevent artificial changes in the index level, ensuring the index reflects true market movements; for example, in a stock split, the divisor is recalibrated as D_{t+1} = \frac{ \text{Index Initial Market Cap}_{t+1} }{ \text{Index Level}_t }.^[18] The index is denominated in USD, with variants including a price return index (excluding dividends) and total return indexes—gross (before withholding taxes) and net (after taxes on dividends).^[18] Foreign exchange fluctuations are handled by converting end-of-day closing prices from local currencies using the WM/Reuters (WMR) London 4:00 P.M. spot rates from the previous trading day (t-1), which provides a standardized reference while minimizing intraday volatility impacts.^[18] For corporate action adjustments, MSCI offers two equivalent methods: the Price Adjustment Factor (PAF), which modifies individual security prices (e.g., reducing price by the dividend amount ex-date) before aggregation, and the Index Divisors method, which alters the overall divisor to offset the market cap impact of the event, both ensuring identical index levels post-adjustment.^[18] The PAF approach is particularly useful for interim calculations involving new constituents, while the divisors method facilitates rebalancing continuity.^[18]

Review and Rebalancing

The MSCI EAFE Index undergoes quarterly comprehensive reviews in February, May, August, and November to maintain alignment with evolving market conditions, including assessments of country classifications, security eligibility, size-segment cutoffs, and overall index composition. These reviews, implemented since February 2023, replaced the prior semi-annual comprehensive reviews in May and November along with lighter quarterly reviews in February and August, ensuring more frequent updates to the equity universe and investable market capitalization while minimizing disruptions. An annual market classification review occurs in June to evaluate potential reclassifications of countries between developed, emerging, and frontier markets.^[14] Rebalancing occurs effective at the close of the last business day of February, May, August, and November, with weights adjusted based on updated market capitalizations, investability criteria, and buffer zones to control additions and deletions. Corporate events such as mergers, acquisitions, bankruptcies, and spin-offs are handled on an ongoing basis, typically implemented as they occur or intra-quarter, with announcements provided at least 10 business days in advance for expected events and two days for confirmed ones to allow market participants preparation time. Buffer rules, such as those at two-thirds and 1.5 times the market size-segment cutoff, help limit unnecessary turnover by preventing frequent migrations between large- and mid-cap segments, with wider buffers applied during periods of market stress under light rebalancing procedures approved by MSCI's committees.^[14] Changes to the index composition, including additions and removals of securities, are driven primarily by shifts in market capitalization relative to size-segment cutoffs and investability requirements, with a focus on achieving target coverage of 85% of the free-float-adjusted market capitalization in each market. The methodology targets low turnover per rebalance, typically under 10%, to promote stability and replicability for investors, as evidenced by historical annual turnover rates for similar developed markets indexes averaging around 5-7% in recent years. Notable past implementations include the 2007-2008 transition to the Global Investable Market Indexes (GIMI) methodology, which incorporated mid-cap securities into the standard EAFE Index to expand coverage from large caps only, using phased inclusion factors to manage turnover during the shift.^[14]^[19] Governance of the review and rebalancing process is overseen by MSCI's Equity Index Committee (EIC) and Index Policy Committee (IPC), which apply transparent, rules-based guidelines to ensure objectivity, replicability, and continuity in reflecting developed markets ex-North America. These committees review methodology updates annually and can invoke discretionary measures, such as light rebalancing during high volatility (e.g., when MSCI ACWI 10-day volatility exceeds 0.55%), while incorporating feedback from market consultations to adapt to structural changes without altering core principles.^[14]

Performance and Characteristics

Historical Returns

The MSCI EAFE Index has historical data beginning December 31, 1969 (back-tested), with a base value of 100, prior to its official launch on March 31, 1986, and has delivered an annualized net total return of approximately 8.0% from inception through March 2025, reflecting growth driven by post-war economic expansion and increasing globalization in developed markets outside North America.^[20] This performance includes net dividends, which have contributed steadily to total returns over the decades. The total cumulative return from 1969 to 2025 exceeds 10,000%, transforming an initial investment into over 100 times its original value when accounting for reinvested dividends.^[21] Over benchmark periods, the index exhibited strong growth in the 1980s bull market, averaging about 15% annually amid favorable currency movements and economic recoveries in Europe and Japan, though it faced a sharp -25% drop during the October 1987 crash before rebounding.^[22] The 1990s saw more moderate performance during the global tech boom, with annualized returns around 6-7%, benefiting from diversified exposure but lagging U.S.-centric technology gains. In contrast, the 2000s marked a "lost decade" with average annual returns of roughly -1%, hampered by the dot-com bust, currency headwinds, and the 2008 financial crisis, during which the index plunged -44% in that year alone before a gradual recovery.^[23] From 2020 to 2025, the index achieved approximately 9% annualized returns, supported by post-pandemic stimulus, supply chain adjustments, and resilience amid inflation and interest rate hikes, with notable yearly gains of 8% in 2020, 11% in 2021, and 18% in 2023. As of mid-November 2025, the year-to-date total return stands at approximately 28%.^[1] The price return index level stood at approximately 2,820 as of mid-November 2025, representing a cumulative price appreciation of over 2,700% since inception, while the historical dividend yield has averaged 2.5-3%, providing a stable income component currently at 2.86%.^[24]^[1] When adjusted for inflation, the index's real annualized return since 1969 approximates 5%, outpacing global consumer price increases and underscoring its role in preserving purchasing power over long horizons.^[20]

Risk Profile and Volatility

The MSCI EAFE Index has demonstrated historical annualized standard deviation ranging from 13% to 18% over various periods, with a 10-year figure of 14.80% as of October 2025, reflecting moderate volatility similar to that of the S&P 500 at around 15%.^[25] Its beta relative to broader global markets, such as the MSCI World Index, is approximately 0.9, indicating slightly lower sensitivity to worldwide equity movements, while the maximum drawdown reached -60.41% during the global financial crisis from October 2007 to March 2009.^[25]^[26] Key risk factors include significant currency exposure due to the index's USD denomination, where fluctuations in major constituent currencies like the Japanese yen and euro can amplify returns or losses for non-US investors; for instance, yen depreciation has historically contributed to heightened volatility during periods of economic stress in Asia.^[1] Geopolitical risks are prominent in Europe, which comprises over 60% of the index's weight, including uncertainties from EU regulatory changes, trade policies, and regional conflicts that can disrupt market stability.^[27] Additionally, sector concentration in cyclical industries—such as financials (19.4% weight) and industrials (14.8% weight)—exposes the index to amplified downturns during economic contractions, as these sectors are highly sensitive to global growth cycles.^[25]^[28] The index's historical Sharpe ratio, a measure of risk-adjusted returns, has averaged 0.4 to 0.5 over longer horizons like 10 years (0.42 as of October 2025), underscoring moderate efficiency in compensating investors for taken risks.^[25] Its correlation to US markets, approximately 0.8 over recent decades, offers partial diversification benefits by not moving in perfect unison with domestic equities, though rising correlations in recent years have somewhat diminished this advantage.^[29] Currency-hedged variants of the MSCI EAFE, such as the MSCI EAFE 100% Hedged to USD Index, mitigate foreign exchange volatility by neutralizing currency movements, typically reducing overall annualized volatility by 3 to 5 percentage points compared to the unhedged version—for example, from 15.2% to 12.3% over the past decade—while preserving equity exposure.^[30]^[31]

Investment Applications

Exchange-Traded Funds

Exchange-traded funds (ETFs) provide investors with a convenient and cost-effective way to gain exposure to the MSCI EAFE Index through physical replication of its constituents. The iShares MSCI EAFE ETF (EFA), managed by BlackRock, is a prominent example, tracking the index with approximately 695 holdings as of November 2025 and assets under management (AUM) of $68.6 billion.^[26] Launched in August 2001, EFA employs a full replication strategy, holding the majority of the index's large- and mid-cap stocks from developed markets in Europe, Australasia, and the Far East, excluding the U.S. and Canada.^[26] Its expense ratio stands at 0.32%, making it accessible for retail and institutional investors seeking broad international diversification.^[26] Other notable ETFs offer similar exposure with slight variations in scope and cost. The Vanguard FTSE Developed Markets ETF (VEA) aligns closely with EAFE by targeting developed markets ex-North America, though it includes small-cap stocks and Canada, with an AUM of $250.8 billion and an ultralow expense ratio of 0.03% as of November 2025.^[32] Similarly, the Schwab International Equity ETF (SCHF) tracks the FTSE Developed ex-U.S. Index, providing low-cost access (0.03% expense ratio) to over 1,400 holdings and $52.2 billion in AUM.^[33] These funds feature high daily liquidity on the NYSE Arca exchange, enabling intraday trading, and distribute dividends semi-annually to reflect underlying foreign securities' payout schedules.^[34] Tracking error for EFA remains low, typically under 0.5% annually, due to optimized sampling and efficient portfolio management.^[35] Collectively, ETFs tracking the MSCI EAFE Index or closely aligned developed ex-U.S. benchmarks manage over $100 billion in AUM, with significant adoption in retirement accounts such as 401(ks and IRAs for their tax efficiency and ease of integration into target-date funds.^[36] Investors favor these vehicles for core satellite strategies, where they complement U.S. equity allocations to achieve global balance without the complexities of direct stock selection.^[37] Specialized variants address specific risk preferences and values. The iShares Currency Hedged MSCI EAFE ETF (HEFA) mitigates foreign exchange volatility by hedging to the U.S. dollar, holding a similar portfolio to EFA with an expense ratio of 0.35% and $6.6 billion in AUM.^[38] For sustainable investing, the iShares ESG Aware MSCI EAFE ETF (ESGD) tracks an ESG-optimized version of the index, emphasizing companies with strong environmental, social, and governance profiles while maintaining broad market representation, with $10.5 billion in AUM.^[39] These options enhance the index's accessibility for tailored portfolio construction.^[40]

Mutual Funds and Other Vehicles

Mutual funds provide a popular vehicle for investors seeking exposure to the MSCI EAFE Index, offering passive and active strategies that track or benchmark against developed markets outside North America. The Fidelity International Index Fund (FSPSX) is a prominent passive option, investing at least 80% of its assets in common stocks included in the MSCI EAFE Index to replicate its performance, with a net expense ratio of 0.035% as of April 2025.^[41] Similarly, the Vanguard Developed Markets Index Fund Admiral Shares (VTMGX) aims to track the performance of developed markets excluding North America, approximating the MSCI EAFE through its benchmark (previously the MSCI EAFE Index until 2013, now the FTSE Developed All Cap ex US Index), featuring an expense ratio of 0.05% as of April 2025 and a minimum investment of $3,000.^[42] For active management, the American Funds EuroPacific Growth Fund (AEPGX) invests primarily in attractively valued companies in developed and emerging markets outside the U.S., using the MSCI All Country World Index ex USA (ACWI ex USA) as its primary benchmark for performance evaluation, which includes both developed and emerging markets outside the US.^[43] These mutual funds typically feature end-of-day pricing based on the net asset value (NAV) calculated after market close, distinguishing them from intraday-traded products, along with minimum initial investments around $3,000 for retail shares and automatic reinvestment of dividends to compound returns over time.^[44] Institutional share classes, such as those offered by Fidelity and Vanguard, often attract higher assets under management due to lower fees and suitability for large investors, with total AUM across EAFE-tracking mutual funds exceeding hundreds of billions of dollars collectively.^[45] Beyond traditional open-end mutual funds, other vehicles offer MSCI EAFE exposure through closed-end funds, which trade on exchanges like stocks and may employ leverage to amplify returns, such as certain international equity closed-end funds that align with EAFE constituents for enhanced yield potential.^[46] Derivatives like futures and options on the iShares MSCI EAFE ETF (EFA) provide leveraged or hedged access to the index's performance, available through exchanges including Cboe for options and enabling tactical trading strategies.^[47] Separately managed accounts (SMAs) allow customized portfolios benchmarking the MSCI EAFE, often used by high-net-worth individuals for tax-efficient direct ownership of index-like holdings, as offered by firms like Fidelity.^[48] Additionally, MSCI EAFE components are integrated into target-date funds for retirement planning, where they contribute to the international equity allocation that glides toward conservatism over time, such as in American Funds Target Date Retirement series.^[49] For long-term holders, mutual funds tracking the MSCI EAFE offer advantages like lower trading costs due to the absence of intraday bid-ask spreads and brokerage commissions on purchases, alongside automatic dividend reinvestment without additional fees, making them suitable for buy-and-hold strategies.^[50] However, they provide less liquidity than exchange-traded alternatives, as shares can only be redeemed at end-of-day NAV, potentially limiting flexibility during volatile markets. Passive variants like FSPSX emphasize cost efficiency and close index tracking, while active options such as AEPGX seek to outperform the benchmark through stock selection, though they typically carry higher expense ratios around 0.83%.^[43]

Comparisons and Alternatives

Versus MSCI World Index

The MSCI World Index includes 23 developed markets, encompassing the United States and Canada, which collectively represent about 76% of its total weight (with the U.S. at 72.7% and Canada at 3.23%), and consists of 1,321 constituents that cover approximately 85% of the free float-adjusted market capitalization in each included country.^[51] By contrast, the MSCI EAFE Index deliberately excludes North America, allocating 100% of its weight to 21 developed markets in Europe, Australasia, and the Far East, with 693 constituents also capturing around 85% of the free float-adjusted market capitalization across those regions.^[52] This structural difference results in the MSCI World providing comprehensive exposure to the largest global developed equity markets, while the EAFE serves as a targeted benchmark for non-North American developed markets. Performance between the two indices has diverged notably over time, with the MSCI EAFE underperforming the MSCI World by roughly 2% on an annualized basis over the long term (since the late 1980s), primarily due to the outsized influence of U.S. technology sector dominance in the World Index.^[53] For example, over the 10-year period ending October 31, 2025, the MSCI World delivered an annualized net return of 12.37%, compared to 7.48% for the MSCI EAFE, highlighting the impact of U.S.-driven growth in areas like information technology.^[51]^[52] The indices maintain a high correlation of approximately 0.85 as of 2021, reflecting shared exposure to global economic cycles but tempered by the World's heavier U.S. weighting.^[54] Investors typically employ the MSCI EAFE for targeted international diversification that avoids North American overlap, enabling purer exposure to regions like Europe (approximately 54% weight) and Japan (about 23%), whereas the MSCI World suits broader developed-market strategies that incorporate U.S. and Canadian equities for comprehensive global representation.^[52] The non-U.S. holdings in the MSCI World overlap with the EAFE by roughly 30% by weight, providing some redundancy but also opportunities for complementary allocation. This distinction in use cases underscores the EAFE's role in reducing home-country bias for U.S.-centric portfolios. In terms of weighting, the MSCI EAFE promotes greater regional balance, with top constituents like ASML Holding (2.11%), SAP (1.37%), and AstraZeneca (1.28%) reflecting diversified leadership in semiconductors, software, and pharmaceuticals across Europe.^[52] The MSCI World, however, is markedly U.S.-heavy, featuring mega-cap technology firms such as Apple (4.92%) and Microsoft (4.45%) as dominant top holdings, which are entirely absent from the EAFE and drive its performance premium.^[51] This contrast amplifies the EAFE's sensitivity to European and Asian economic conditions, contrasting with the World's alignment to U.S. market trends.

Versus Other International Benchmarks

The MSCI ACWI (All Country World Index) encompasses both developed and emerging markets, capturing large- and mid-cap stocks across 23 developed markets and 24 emerging markets, with emerging markets comprising approximately 15% of the index weight and the total index market capitalization reaching $92.26 trillion as of October 31, 2025. In comparison, the MSCI EAFE excludes emerging markets entirely, focusing on 21 developed markets outside the US and Canada, with a market capitalization of about $19.78 trillion over the same period. This structural difference results in the ACWI exhibiting greater volatility during emerging market expansions, as seen in the 2003-2007 period when strong growth in emerging economies amplified returns and fluctuations in the ACWI relative to the more stable developed-market focus of the EAFE.^[55]^[15]^[56] The FTSE All-World ex-US index similarly targets markets outside the US but broadens coverage by including emerging markets and small-cap stocks, encompassing around 4,200 constituents compared to the EAFE's 693 large- and mid-cap holdings in developed markets only. This expanded universe in the FTSE index reduces concentration risk through greater diversification across market sizes and regions, while the EAFE's narrower, developed-market emphasis provides superior liquidity and lower exposure to the higher volatility associated with emerging and smaller companies.^[57]^[1] The S&P Global 1200 employs a float-adjusted market capitalization weighting with an emphasis on sector balance during eligibility reviews to align sector weights more closely with the broader global index.^[58] This methodology in the S&P index mitigates the financial sector tilt prevalent in the EAFE—where financials comprise 24.09% of the weight as of October 31, 2025—and promotes a more even distribution across global industry classification standard (GICS) sectors, potentially reducing sector-specific risks for investors.^[15] Overall, the MSCI EAFE serves as a preferred benchmark for targeted, lower-risk exposure to developed international equities, whereas alternatives like the ACWI, FTSE All-World ex-US, and S&P Global 1200 appeal to those seeking comprehensive global or emerging market inclusion, with the EAFE maintaining high correlations (often above 0.90) to these broader indices due to overlapping developed market components.^[59]

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[PDF] MSCI INDEX CALCULATION METHODOLOGY
Feb 1, 2025 · This methodology book describes MSCI's general Index calculation methodology for the MSCI Equity Indexes.Missing: refinements | Show results with:refinements
[19]
[PDF] Index Quarterly Reviews: - MSCI
MSCI World Index - Annual Rebalance Turnover. 5-year average prior to 2023: 2.5%. 6.3. 9.8. 7.6. 6.2. 5.0. 5.7. 0.00. 2.00. 4.00. 6.00. 8.00. 10.00. 12.00. 2018.Missing: EAFE rate
[20]
[PDF] International Equity Select with EM ADR - Lazard Asset Management
Apr 7, 2025 · Dec 1969 – Dec 2009. Dec 1969 – Mar 2025. MSCI USA. +8.5%. +9.2%. MSCI EAFE. +9.5%. +8.0%. As of 31 March 2025. Returns since 1969 are ...
[21]
World - MSCI EAFE Index - Net Return Index | Series - MacroMicro
Oct 24, 2025 · World - MSCI EAFE Index - Net Return Index. 2025-10-24. 10,278.99. 10,251.28. Specs. Category. Stock Market. Region. Global. Frequency.
[22]
Historical Returns on Stocks, Bonds, and Countries - Novel Investor
International Developed Markets Annual Returns 1970 – Current ; 2020, 8.87%, -2.77% ; 2021, 9.57%, 42.25% ; 2022, -5.13%, -25.60% ; 2023, 14.92%, 19.49% ...
[23]
iShares MSCI EAFE ETF (EFA) Performance History - Yahoo Finance
Annual Total Return (%) History ; 2024. 3.51%: 4.85% ; 2023. 18.40%: 16.25% ; 2022. -14.35%: -15.84% ; 2021. 11.46%: 9.72% ; 2020. 7.59%: 9.30%.<|separator|>
[24]
MSCI EAFE Historical Data (MIEA00000PUS) - Investing.com
Explore MSCI EAFE historical data, featuring daily prices, open, high, low, volume, and changes. Analyze trends, all-time highs, historical returns, ...
[25]
None
**Summary of MSCI EAFE Index (USD) Factsheet**
[26]
iShares MSCI EAFE ETF | EFA - BlackRock
Key Facts ; Fund Launch Date. Aug 14, 2001 ; Asset Class. Equity ; Bloomberg Index Ticker. NDDUEAFE ; Distribution Frequency. Semi-Annual ; CUSIP. 464287465.
[27]
Understanding Geopolitical Risk in Investments - MSCI
Aug 30, 2024 · High geopolitical risk has been associated with lower equity returns and higher forecast volatilities over the last 30 years.Missing: EAFE concentration
[28]
A compelling opportunity: How to reframe international equity ...
For 2025 and 2026, however, the MSCI EAFE Value Index is forecast to see 7.9% and 9.2% earnings growth, respectively. Realizing these growth projections would ...
[29]
Rising Correlations Reduce Benefits of International Equity ...
Mar 7, 2023 · From 1970 through 1989, the correlation of the S&P 500 Index to the MSCI EAFE Index was just 0.49. From 1990 through1999, the correlation ...
[30]
Blog | Currency Hedging: how has it worked and how might it ... - DWS
Jun 30, 2025 · Over the same time frame, annualized volatility has been about 12.3% for MSCI EAFE Currency Hedged versus about 15.2% annual-ized volatility for ...
[31]
[PDF] MSCI CURRENCY HEDGED INDEXES
Hedging the impact of currency has been shown to reduce overall volatility as evidenced by the standard deviations and rolling volatility in Figure 2 (see next ...
[32]
Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA)
The fund employs an indexing investment approach designed to track the performance of the FTSE ... EFV iShares MSCI EAFE Value ETF. 70.48. +0.89%. VOOV Vanguard ...
[33]
Schwab International Equity ETF™ (SCHF) - Morningstar
Oct 13, 2025 · Total Assets. 52.2 Bil. Adj. Expense Ratio. 0.030%. Adj. Expense Ratio. 0.030%. Prospectus Net Expense Ratio. 0.030%. Prospectus Net Expense ...
[34]
iShares MSCI EAFE ETF | EFA
Overall Morningstar Rating for iShares MSCI EAFE ETF, as of Oct 31, 2025 rated against 649 Foreign Large Blend Funds based on risk adjusted total return.
[35]
EFA - iShares MSCI EAFE ETF - ETF Database
Home page. Inception Aug 14, 2001. Index Tracked MSCI EAFE. Analyst ... tracking error. That's a tough offer to beat, unless you have access to this ...
[36]
Are ETFs a Good Fit for 401(k) Plans? - Investopedia
Apr 17, 2025 · The adoption of ETFs in 401(k)s is growing, particularly through self-directed brokerage windows and ETF-based target-date funds. Understanding ...Missing: MSCI EAFE
[37]
[PDF] 401(k) Savings Plan Investment Fund Profiles - Empower
The MSCI EAFE Index tracks the performance of 783 stocks across 21 “developed market” countries located in Western Europe,. Australasia and the Far East (EAFE).
[38]
iShares Currency Hedged MSCI EAFE ETF | HEFA - BlackRock
The Fund's use of derivatives may reduce the Fund's returns and/or increase volatility and subject the Fund to counterparty risk, which is the risk that the ...
[39]
iShares ESG Aware MSCI EAFE ETF (ESGD) - Morningstar
The investment seeks to track the investment results of the MSCI EAFE Extended ESG Focus Index. The fund generally will invest at least 90% of its assets in ...
[40]
iShares ESG Aware MSCI EAFE ETF | ESGD
The iShares ESG Aware MSCI EAFE ETF seeks to track the investment results of an index composed of large- and mid-capitalization developed market equities.
[41]
Fidelity International Index Fund (FSPSX)
Exp Ratio (Gross) - Prospectus. 0.035% as of 04/29/2025 ; Exp Ratio (Net) - Prospectus. 0.035% as of 04/29/2025 ; 12 Month Low-High, $46.07-$61.38 as of 10/31/ ...Missing: tracks | Show results with:tracks
[42]
VTMGX - Vanguard Developed Markets Index Fund Admiral Shares
Expense ratio. 0.05%. as of 04/29/2025. Is this the key ... MSCI EAFE Index through May 28, 2013; FTSE Developed ex North America Index ...
[43]
EUPAC Fund R-6 - Capital Group
MSCI EAFE (Europe, Australasia, Far East) Index is a free float-adjusted market capitalization weighted index that is designed to measure developed equity ...
[44]
VTMGX-Vanguard Developed Markets Index Fund Admiral Shares
Vanguard average mutual fund expense ratio: 0.09%. Industry average mutual fund expense ratio: 0.50%. All averages are asset-weighted. Industry average ...
[45]
Vanguard Developed Markets Index Admiral (VTMGX) - Morningstar
Vanguard Developed Markets Index Admiral VTMGX · NAV / 1-Day Return 19.45 / +1.29 % · Total Assets 256.8B · Adj. Expense Ratio. 0.050% · Expense Ratio 0.070% ...
[46]
Understanding leverage in closed-end funds | Nuveen
Most closed-end funds use leverage in an effort to enhance the fund's return, income or both. On the following pages we provide an overview of how leverage ...
[47]
EFA Options Chain | iShares MSCI EAFE ETF - Investing.com
Explore EFA Options Chain Data: Analyze call and put options, strike prices, last traded prices and trading volumes. Make informed investment decisions.
[48]
Separately Managed Accounts | International Strategy | Fidelity
A separately managed account that diversifies across developed-market countries outside the US in an effort to deliver returns greater than the MSCI EAFE Index.<|separator|>
[49]
[PDF] American Funds Target Date Series Build wealth. Preserve wealth.
Since January 1, 1988, the MSCI All Country World Index ex USA has been used. MSCI EAFE. Index reflects dividends net of withholding taxes, and MSCI All Country ...
[50]
Mutual funds vs. ETFs: Which is best for your investment strategy?
Aug 13, 2025 · The other key benefits of ETFs include tax efficiency, as they generate fewer taxable events than mutual funds, as well as lower costs. ...Mutual Funds Vs. Etfs: Which... · Key Insights · Investment Vehicle...
[51]
American Funds EUPAC Fund (AEPGX) - US News Money
American Funds characterizes the fund's strategy as seeking long-term growth by investing primarily in stocks of companies based in Europe or the Pacific Basin.<|separator|>
[52]
[PDF] the MSCI World index factsheet
The MSCI World Index captures large and mid-cap representation across 23 Developed Markets (DM) countries*. With 1,321 constituents, the index covers ...
[53]
https://www.msci.com/documents/10199/3db385c5-c63e-47e3-a76b-d7964b65c997
[54]
[PDF] The World Is Not Enough? - MSCI
The MSCI Europe, Australasia and Far East (EAFE) Index has been a dominant benchmark for US-based investors seeking international diversification.Missing: stand | Show results with:stand
[55]
To Invest Internationally, or Not — That Is the Question
May 18, 2021 · Correlations were about 0.55 for both EAFE and EM in the 1990s, but have now increased to about 0.85 for EAFE and 0.75 for EM in the last ...<|separator|>
[56]
None
**Summary of MSCI ACWI Index (USD) as of October 31, 2025:**
[57]
[PDF] Emerging Markets: A 20Kyear Perspective - MSCI
MSCI Barra is proud to celebrate the 20 year anniversary of the MSCI Emerging Markets Index. When the index was launched in 1988 it was the first ...Missing: origins | Show results with:origins
[58]
FTSE Global Equity Index Series (FTSE GEIS) - LSEG
FTSE All-World Ex US. 418.10. 1.07. -0.13. 0.03. FTSE Asia Pacific. 450.00. 0.89. -0.76 ... FTSE Global ex US Micro Cap · FTSE Germany All Cap · FTSE Taiwan RIC ...
[59]
[PDF] S&P Global 1200 Index Methodology
Jan 15, 2021 · Sector balance, as measured by a comparison of each GICS sector's weight in the index relative to its weight in the S&P Global 1200 is also ...
[60]
[PDF] I Fund Benchmark Evaluation
EAFE Index is that investors in the I Fund will gain broader coverage of the international market with exposure to both Canada and the emerging markets.