We have seen some relevant fund flows this week in IEFA (iShares Core MSCI EAFE, Expense Ratio 0.12%) with some evident profit taking causing >$750 million to leak out of the ETF.
Trading volume during at least one recent session has been heavy as well relative to the 1.4 million shares daily that typically trades in the fund. In spite of the recent outflows in IEFA, the fund has still had a reasonably strong 2015 thus far in terms of overall asset flows, pulling in >$1.5 billion net, and since its late October of 2012 inception it has grown into the fourth largest “Developed Markets ETF” in the U.S. listed landscape with about $5 billion in assets under management.
The giants of course in this ETF market segment are EFA (iShares MSCI EAFE, Expense Ratio 0.34%, $59.4 billion in AUM) and VEA (Vanguard Europe Pacific, Expense Ratio 0.09%, $26.9 billion in AUM), which are well tenured funds having debuted in 2001 and 2007 respectively.
DBEF (Deutsche MSCI EAFE Hedged Equity, Expense Ratio 0.35%) has also made a name for itself in a relatively short amount of time and has rallied up nearly $11 billion in total assets under management at this point in time. According to fund literature, IEFA was designed as follows: “1) Exposure to a broad range of companies in Europe, Australia, Asia, and the Far East 2) Low cost, comprehensive access to stocks in developed international countries and 3) Use at the core of your portfolio to diversify internationally and seek long-term growth.”
Head to head with EFA, IEFA has shown marginal out-performance year to date, having rallied in excess of 9% and over time since its inception the out-performance is even more evident. The potential out-performance coupled with a much lower expense ratio than EFA has clearly attracted ETF investors over time, and we would expect similar potential swaps to continue if the fund continues to deliver.
From a portfolio standpoint IEFA is most heavily weighted to Japan (>23%), followed by the United Kingdom (>20%), with much lesser weightings to countries like France (8.98%), Germany (8.68%), and Switzerland (8.62%) to name some of the other top country weightings. We spoke about bullish looking options flows in EWJ (iShares MSCI Japan, Expense Ratio 0.48%) from earlier this week which gives even more reason to watch IEFA closely in the near term.
iShares Core MSCI EAFE ETF
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