Vanguard’s New Europe Pacific ETF

Vanguard launched a new international equity ETF on July 26, 2007. The latest offering, Vanguard Europe Pacific ETF (VEA), tracks Morgan Stanley Capital International (MSCI) Europe, Australasia, Far East (EAFE) Index. The index comprises 21 developed economies (PDF file) outside of North America, including Japan, United Kingdom, France, Switzerland, Germany, Australia, Italy, Spain, Netherlands, Sweden, Hong Kong, Finland, Belgium, Singapore, Denmark, Ireland, Norway, Greece, Austria, Portugal, and New Zealand.

Since inception, the growth of the index till December 2005 is shown in the following chart.

According to the prospectus, the fund “seeks to provide a tax-efficient investment return consisting of long-term capital appreciation.” Currently, the fund holds 1,134 individual stocks with an expense ratio (ER) of 0.15%, which is hard to beat for other competing ETFs and mutual funds. For example, the iShare MSCI EAFE Index Fund (EFA), which tracks the same index, charges 0.35%. From EFA, we may have a sense how VEA will perform. According to Morningstar, EFA has 3-year annualized return of 21.83% and 5-year annualized return of 19.67%. VEA could be a good alternative to EFA. 

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