Europe, Australasia, Far East (EAFE)

What Is Europe, Australasia, Far East (EAFE)?

Europe, Australasia, and the Far East are 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.

Key Takeaways

  • Europe, Australasia, and the Far East are the most developed geographical areas of the world outside the United States and Canada.
  • 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.
  • MSCI EAFE is the oldest international stock index, having been calculated since December 21, 1969, and is the most commonly used benchmark for foreign stock funds in the United States.
  • In addition to the MSCI EAFE Index, MSCI has the MSCI EAFE IMI Index and the MSCI EAFE All-Cap Index.
  • The MSCI EAFE indexes are often used in the financial industry to compare the performance of the United States to the rest of the developed world.

Understanding Europe, Australasia, Far East (EAFE)

Europe, Australasia, and the Far East represent some of the most productive and profitable regions in the world, making them popular places for investors to park their capital.

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 is the oldest international stock index, having been calculated since December 21, 1969, and is the most commonly used benchmark for foreign stock funds in the United States.

The index covers approximately 85% of the free float-adjusted market capitalization of each of the countries included in the index and includes stocks from 21 developed markets outside the U.S. and Canada. As of April 2022, the index tracks the equity performance of 825 companies, over half of which operate in the financial, consumer, industrial, and healthcare sectors.

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 ICE Futures Exchange and the Chicago Board Options Exchange (CBOE) are licensed to list futures contracts on this index.

EAFE companies have a large impact on the global financial system. According to MSCI.com, there are over $2.2 trillion in ETF assets that are benchmarked to the MSCI Equity Index family globally as of April 2022.

EAFE Region Constituents

European countries are the most represented in the MSCI EAFE Index and consist of Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. The index also features five countries from Australasia (Australia, Hong Kong, Japan, New Zealand, and Singapore), and one from the Middle East (Israel.)

The MSCI EAFE incorporates all the same countries that are represented by MSCI World, minus Canada and the U.S.

MSCI EAFE Index Countries

    

Europe

  

Australasia

Middle East

Austria

Germany

Portugal

Australia

Israel

Belgium

Ireland

Spain

Hong Kong

 

Denmark

Italy

Sweden

Japan

 

Finland

Netherlands

Switzerland

New Zealand

 

France

Norway

United Kingdom

Singapore

 

MSCI EAFE Index Countries

Other EAFE Indexes

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 April 2022, it has 3,179 constituents and covers approximately 99% of the free float-adjusted market capitalization in each country. The MSCI EAFE All-Cap Index, on the other hand, tracks large-, mid-, small-, and micro-capitalization companies and has 8,143 constituents.

Article Sources
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  1. MSCI. "MSCI EAFE Index Forms Basis of EFA Options," Pages 1-2.

  2. MSCI. "MSCI EAFE Index (USD)," Page 2.

  3. MSCI. "MSCI EAFE Index."

  4. MSCI. "MSCI EAFE IMI (USD)," Page 1.

  5. MSCI. "MSCI EAFE All Cap Index (USD)," Page 1.

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