DEFINITION of 'Europe, Australasia, Far East (EAFE)'

Europe, Australasia and the Far East (EAFE) refers to the most developed geographical areas of the world outside the United States and Canada. These regions are commonly referred to by the acronym EAFE, and many different exchange-traded funds (ETFs) and mutual funds focus their efforts on investing in companies in these regions.

BREAKING DOWN 'Europe, Australasia, Far East (EAFE)'

Europe, Australasia and the Far East represents some of the most productive and profitable regions in the world. Morgan Stanley Capital International (MSCI) created a stock market index known as the MSCI EAFE to capture the performance of large- and mid-capitalization companies in the EAFE region. The MSCI EAFE Index covers approximately 85% of the free float-adjusted market capitalization of each of the countries included in the index.

EAFE Region Constituents

MSCI tracks the equity performance of more than 900 companies across 21 countries in Europe, Australasia and the Far East. As for Europe, the countries included in the index as of May 2016 are: Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. Countries from Australasia included in the index are Australia, Hong Kong, Japan, New Zealand and Singapore. The only country from the Far East represented in the index at this time is Israel.

As the basis for index-linked and index-tracking ETFs and mutual funds, the EAFE index is the most commonly used index for developed international equity products. Beyond the various funds available to investors based on this index, the Chicago Mercantile Exchange (CME), NYSE Liffe US and the Bclear platform of Liffe are licensed to list futures contracts on the MSCI EAFE Index.

In addition to the MSCI EAFE Index, MSCI has the MSCI EAFE IMI Index and the MSCI EAFE All-Cap Index. The EAFE IMI Index tracks the performance of large-, mid-, and small-capitalization companies. As of 2018, it has 3,215 constituents and covers approximately 99% of the free float-adjusted market capitalization in each country. The MSCI EAFE All-Cap Index tracks large-, mid-, small-, and micro-capitalization companies and has 7,717 constituents.

Over half of the companies in the MSCI EAFE index are involved in the financial, consumer and industrial sectors. Companies within developed countries in the Europe, Australasia and Far East have a large impact on the global financial system. According to reports by eVestment, Morningstar and Bloomberg issued on March 31, 2016, there are over $2 trillion in assets that are benchmarked to the MSCI EAFE Index family as of Dec. 31, 2015. These indexes are often used in the financial industry to compare the performance of the United States to the rest of the developed world.

RELATED TERMS
  1. MSCI Inc

    MSCI Inc is an investment research firm that provides indices, ...
  2. The Morgan Stanley Capital International ...

    The Morgan Stanley Capital International All Country World Index ...
  3. MSCI ACWI - All Country World Index

    The MSCI ACWI is a market capitalization weighted index designed ...
  4. Index Fund

    An index fund is a portfolio of stocks or bonds that is designed ...
  5. Value Fund

    A value fund is a fund that follows a value investing strategy ...
  6. MSCI All Country World Commodity ...

    The MSCI All Country World Commodity Producers Sector Capped ...
Related Articles
  1. Investing

    SCZ: iShares MSCI EAFE Small-Cap ETF

    Read an in-depth analysis of the iShares MSCI EAFE Small-Cap Fund, a well-managed exchange-traded fund that tracks small-cap international stocks.
  2. Investing

    Go Contrarian as Stocks Face Seismic Shift

    Investors should move to rebalance their portfolios quickly, Charles Schwab warns.
  3. Investing

    Finding Outperforming Small-Cap ETFs

    This small-cap ETF is trouncing its U.S. rivals with less volatility.
  4. Investing

    Give This International ETF Some Credit

    This ETF combines dividends and currency hedging, and the strategy is working well this year.
  5. Investing

    Goldman ETF Offers Multi-Factor Approach to Developed Markets

    This Goldman Sachs ETF is a winning smart beta strategy for developed markets.
  6. Investing

    Limit Volatility, Currency Risk With This ETF

    Investors wary of volatility and currency risks in markets outside the U.S. should consider this ETF.
  7. Investing

    MSCI Deny Billion Dollar Takeover Talk

    More takeover chatter in the index based market. S&P Global said to offer $120/shr for MSCI, holders may want $130/shr.
  8. Investing

    Top 3 ETFs Tracking the MSCI World Index (URTH, VT)

    Morgan Stanley's Capital International World Index top three ETFs that can give you access to the investments it tracks...
  9. Investing

    International Diversity for a Modest Fee

    Investors can access a big basket of international stocks for a low fee in this ETF.
  10. Investing

    The 5 Largest Developed Market ETFs (EFA, VEA)

    Find out which developed-market ETFs manage the greatest asset base, and why major U.S. equity-only funds are not included in the calculation.
RELATED FAQS
  1. Which benchmarks / indexes track the automotive sector?

    Explore some of the major benchmark equity indexes worldwide that analysts and investors use to track the performance of ... Read Answer >>
  2. How do indexes determine which stocks are removed or added to them?

    Stock indexes are formed based on the kinds of stocks or financial securities they want to track. For example, the Standard ... Read Answer >>
  3. How can I buy an S&P 500 fund?

    Looking for access to the S&P 500? Learn how to access an S&P 500 index fund or ETF. Read Answer >>
Trading Center