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.

Understanding Europe, Australasia, Far East (EAFE)

Europe, Australasia, and the Far East represent 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. It includes stocks from 21 developed markets outside the U.S. and Canada. 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. 

EAFE Region Constituents

MSCI tracks the equity performance of 896 companies across 21 countries in Europe, Australasia, and the Far East. The European countries included in the index 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 Middle East represented in the index at this time is 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

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.

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 2021, it has 3,231 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 7,881 constituents.

Over half of the companies in the MSCI EAFE index are involved in the financial, consumer, industrial, and healthcare sectors. Companies within developed countries in Europe, Australasia, and the Far East have a large impact on the global financial system. According to reports by MSCI.com, there are over $1 trillion in ETF assets that are currently benchmarked to the MSCI Equity Index family globally as of the end of 2020. 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.