Highlighting the theme of investors flocking to ex-US developed markets stocks and exchange traded funds this year, the iShares Core MSCI EAFE ETF (BATS: IEFA) is one of 2017’s top asset-gathering ETFs. In fact, only one ETF has added more new assets than IEFA this year.
IEFA debuted nearly five years ago as a cost-effective alternative to the iShares MSCI EAFE ETF (NYSEArca: EFA), which tracks the developed EAFE or European, Australasia and Far East countries. IEFA charges just 0.08% per year, the equivalent of $8 on a $10,000 position, while EFA has an annual fee of 0.33%.
“Get more for less was the message when BlackRock cut expense ratios on many of its iShares Core exchange-traded funds nearly a year ago,” reports Ari Weinberg for the Wall Street Journal. “The marketing worked, and investors responded by sending nearly $17.9 billion into an ETF for non-U.S. stocks, iShares Core MSCI EAFE ETF (IEFA)—ranking it third in net new assets since. Going head-to-head with similar developed-market equity ETFs from Vanguard and Charles Schwab , the $33 billion fund benefited from European economic tailwinds and exposure to 2,500 international stocks, including small-caps, as well as its 0.08% annual expense ratio.”
IEFA holds over 2,500 stocks with over half the ETF’s combined geographic weight dedicated to Japan, the U.K. and France. Overall, 16 countries are represented in the ETF. Eleven of those countries are European nations.
The European economy is steadily improving, supported by a wide range of indicators, which may lead to above average growth for the remainder of the year and into the next. Eurozone growth has accelerated, with growth and business indicators showing positive results.
This year, international stocks are beating their U.S. counterparts as both the widely followed MSCI EAFE Index and the MSCI Emerging Markets Index are topping the S&P 500. Several of this year’s top asset-gathering ETFs are ex-US developed and emerging markets funds.
“That small-cap exposure has lifted IEFA to an 18.7% gain in 2017, compared with 17.8% for EFA, according to Morningstar. Other funds investing in non-U.S. developed markets include the $60 billion Vanguard FTSE Developed Markets ETF (VEA) at 0.08% and the $10.9 billion Schwab International Equity ETF (SCHF) at 0.06%, while iShares might be looking to compete with itself even further, launching iShares Core MSCI Developed Markets ETF (IDEV), including Canada, for 0.07% in March,” according to Journal.
IDEV is off to a solid start as highlighted by nearly $66 million in assets under management in less than six months on the market.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.