5 major developed market ETFs (EFA, VEA)

Developed market exchange-traded funds (ETFs) can help investors obtain relatively cheap and extensive diversified investments by accessing hundreds or thousands of individual holdings in the world’s most developed economies. Here, let’s take a look at the five largest developed market ETFs in terms of assets under management (AUM).

Developed markets belong to highly productive, industrialized countries with mature rule of law. In addition to the United States, developed markets include Japan, the United Kingdom, France, Canada, and Australia. In order to distinguish developed market ETFs from basic domestic ETFs and other niche markets, the following list focuses on ETFs with at least 5% exposure in two or more developed market economies (excluding the United States).

Assets under management: US$123.7 billion

The Vanguard FTSE Developed Markets ETF was launched in 2007 to track the FTSE Developed Markets (except the United States) Index, which measures the return on investment of stocks issued by companies in major markets in Canada and Europe and the Pacific. In fact, European stocks account for more than half of the fund’s portfolio, at 53.6%. The Vanguard FTSE developed market ETF previously excluded Canadian stocks, but it eventually changed its policy to include important trends in North America. The expense ratio of passively managed funds is 0.05%.

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Assets under management: US$57.6 billion

BlackRock issued the iShares MSCI EAFE ETF in 2001, and has been ranked first or close to the top of the international ETF market ever since. ETF tracks the excellent Morgan Stanley Capital International (MSCI) EAFE Index, which is the most widely cited international stock index in the United States, reflecting stocks in Europe, Australia, Asia, and the Far East (EAFE). The fund spends about 25% of its assets in Japanese stocks, about 15% in British stocks, and about 11% in French stocks. Switzerland, Germany and Australia each account for more than 5% of the fund’s assets. The fund’s expense ratio is 0.32%, which is higher than the expense ratio of the Vanguard FTSE developed market ETF.

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Assets under management: US$68.9 billion

BlackRock’s iShares Core MSCI EAFE ETF was launched in 2012 to track the MSCI EAFE Investable Market Index (IMI), which is similar to the MSCI EAFE index but is larger and more comprehensive. In addition to the representatives of mid-cap stocks and large-cap stocks provided by the MSCI EAFE index, the index also includes representatives of small-cap stocks. The fund’s highest exposure looks similar to that of the iShares MSCI EAFE ETF. About 25% of its assets are used in Japanese stocks and about 16% are used in UK stocks. France, Switzerland, Germany and Australia each account for more than 5% of fund assets. The expense ratio of the iShares Core MSCI EAFE ETF is competitive with the expense ratio of the Vanguard FTSE developed market ETF, which is 0.07%.

Assets under management: $19.1 billion

Like the Vanguard FTSE Developed Markets ETF, the Schwab International Equity ETF is designed to track the FTSE Developed Markets (except the United States) index. Japanese stocks account for approximately 22% of its portfolio, and British stocks account for approximately 15%. The stocks of France, Germany, Canada, Switzerland and Australia all account for more than 5% of the fund’s assets. The fund has been in existence since 2009, and its expense ratio is 0.06%.

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Assets under management: USD 9.7 billion

iShares MSCI EAFE Small Cap ETF was launched in 2007 to track the performance of the MSCI EAFE Small Cap Index, which only focuses on small listed companies in Europe, Australia, Asia and the Far East. Similar to the other iShares ETFs on this list, Japanese stocks have the highest proportion of the fund’s assets at about 29%, and the United Kingdom has the second highest proportion at 17%. Australia, Germany and Sweden’s stocks all account for more than 5% of the fund’s assets. The fund’s expense ratio is the highest in this list, at 0.40%.

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