Vanguard Europe Pacific ETF (VEA) Review

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.

msci_eafe.png

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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4 Responses to “Vanguard Europe Pacific ETF (VEA) Review”

  1. skylog |  Jul 29, 2007 at 10:37 pm

    this looks interesting. i have been building my position in VEU, and i was wondering what your thoughts are regarding VEU? if any? personally, i like the fact that VEU has exposure (17.00% if my memory serves me right) to some emerging markets as well as those develolped in europe and asia. keep up the great work on the site.

  2. Luke |  Jul 31, 2007 at 10:12 pm

    Well this is good news…This has me thinking of ending my position in EFA for the time being and starting up in VEA…

    It’s good news, but I just don’t want to have to sell EFA and do all of the cost basis come tax time to basically do an identical swap…

    Thoughts?

  3. Sun |  Aug 02, 2007 at 12:02 am

    I don’t own VEU, but I think the fund is a good choice to invest in international stock markets for the same reason for owning the entire US stocks: you get the diversification and average return and don’t have to worry about making a wrong choice. Right now the emerging market is hot, but quite volatile. In the long term, I feel emerging markets could offer better returns than developed markets.

    Luke:I am afraid I don’t have a good idea on what to do with your EFA. If you have a large position, I don’t think you want to sell it if the fund is held in your taxable account. Just keep it and start to use VEA to replace it. If your position is small, selling it won’t have a big impact on your taxes. If you do a swap, you are still selling the fund, right?