IEFA charges just 0.08 percent per year, or $8 on a $10,000 investment, compared with EFA's annual expense ratio of 0.32 percent. Overview Holdings Performance ESG New. At the time this article was written, the author had no positions in the securities mentioned. IEFA is a brand-new fund still seeking traction with investors, while EFA is one of the most liquid ETFs on the planet. Nigeria candidate to lead WTO staying positive despite 'hiccups', South Korea starts to close dog meat farms as attitudes change, South Korea expresses 'serious concern' over any Japanese radioactive water dump, Buying Tesla Stock? The emerging markets bond index (EMBI) is a benchmark index for measuring the total return performance of international government bonds by emerging markets. IEFA’s second improvement over EFA is wonkier, but it matters. VEA will include South Korea in the first part of 2013, but will still lack small-caps and Canadian equities. IEFA has a higher 5-year return than EFA (4.6% vs 4.05%). I’ve heard both sides of this point, but if I have to choose one international equity fund, I want it to hold household names like Samsung and Hyundai. In the first quarter, investors added more than $4 billion in new capital to IEFA, a total surpassed by just four other ETFs and just one other ex-U.S. developed markets ETF. ", One of those funds is the iShares Core MSCI EAFE ETF (IEFA). The EAFE Index is a stock index that serves as a performance benchmark for the major international equity markets. What’s the trade-off? (See also: iShares Family of ETFs to See Lower Fees. Currently, the Schwab International Equity ETF (SCHF) is the only ex-U.S. developed markets ETF with a lower annual fee than IEFA. Tradability. The argument is definitional:IEFA and EFA don’t consider South Korea to be a developed market. While IEFA is a solid choice for the long haul, I believe SCHF’s trade-off for country breadth over firm size depth gives it the edge over IEFA and over the present and future versions of Vanguard’s VEA. This trade-off highlights the iShares “Core” philosophy:IEFA is one of 10 new iShares funds expressly designed for long-term investors who aim for more accurate coverage of the target market and that come with cheaper annual fees. SCHF charges just 0.07 percent per year. A new fund, the iShares Core MSCI EAFE ETF (IEFA) is marketed as an answer to this exact need. IEFA is a brand-new fund still seeking traction with investors, while EFA is one of the most liquid ETFs on the planet. The Schwab International Equity ETF (SCHF) includes Canada and South Korea, but slights small-caps. Consulting intraday net asset value (iNAV) might help too, but bear in mind that many underlying securities don’t trade while the ETF itself is trading. EFA has a massive asset base of almost $37 billion, and its top-tier liquidity means that it's easy and cheap to trade—even for novices. First, it has a much lower annual fee—0.14 percent vs. EFA’s 0.34 percent. But for long-term investors, IEFA has two structural advantages over EFA. One of the more noteworthy themes pertaining to exchange-traded fund (ETF) flows in the first quarter was investors embracing international equity funds. That doesn’t mean it’s betting big on small firms. Put simply, IEFA does a better job capturing the market. IEFA rights this wrong. Returning to the indexing logic above, IEFA and EFA bet against Canada and South Korea. Both ETFs allocate about 51 percent of their respective lineups to Japan, the U.K. and France, in that order. It helps to grasp the broader context on IEFA by holding it up to the largest ETF in the space—its sister fund, the iShares MSCI EAFE Index Fund (EFA). Single-fund solutions make more sense, but among the dozen or so ETFs that compete, none delivers all the goods over the long haul. IEFA vs. VEA: Head-To-Head ETF Comparison The table below compares many ETF metrics between IEFA and VEA. The Vanguard MSCI EAFE ETF (VEA) is huge, cheap and liquid, but it currently tracks the same index as EFA, meaning suboptimal depth and breadth. Below is the comparison between IEFA and EFA. Proving that investors continue gravitating toward ETFs with low fees, three of those four international ETFs can legitimately be called "cheap. As a reality check, we at IndexUniverse harp on the fact low fees don’t necessarily mean low all-in costs. And IEFA will indeed cost more to trade than EFA. ), There are some important differences between IEFA and EFA, including the fact that the former tracks the MSCI EAFE Investable Market Index. Additionally, IEFA has topped EFA by 300 basis points over that period, indicating that much of the core ETF's advantage is attributable to its lower fees. Contact Paul Britt at pbritt@indexuniverse.com. In comparison, EFA and many other competing funds lop off these smaller firms. Wait Until You See This, South Korean ex-president Lee ordered back to prison for 17 years, FBI warns ransomware assault threatens US health care system, Toyota recalling 5.84 million vehicles for fuel pump issue, WW CEO on earnings beat: People are 'reappraising' their health during COVID-19, Apple Q4 earnings beat expectations but sees decline in sales in China, Dow Jones Futures Fall As Apple Slides On China Sales Dive; Market Rally Still Under Pressure, Here's why 10,000 Burger King drive-thrus are going digital, Arnott Drops Patent Suit Against WisdomTree, European ETF Trading Slows, Assets Growing. But they’ll cost a bit more to trade. (See also: How ETF Fees Work.). While it offers deeper coverage than EFA by including smaller firms, it doesn’t improve on the breadth of coverage with respect to country exposure. IEFA is a brand-new fund still seeking traction with investors, while EFA is one of the most liquid ETFs on the planet. It simply holds them in marketlike proportion, meaning they make up something like 10 percent of the portfolio.