Why the MSCI EAFE Index Has Been Mediocre
The so-so performance of the EAFE Index stems from its regional allocations and focus on large-caps.
The proliferation of index funds has been a tremendous benefit to individual investors. Low-cost access to a representative, well-diversified portfolio has enabled them to piggy-back on the collective efforts of active investors.
But the assumption that these characteristics cause index funds to outperform a majority of active managers has been weaker for those that track the MSCI EAFE Index. For decades this index has been referenced by investors and fund managers alike as a representative benchmark for foreign stocks. But the performance of this stalwart index relative to funds in the foreign large-blend Morningstar Category has been tepid to say the least.
Daniel Sotiroff does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.