XEF ETF Review 2022: iShares Core MSCI EAFE IMI Index ETF Explained

Exchange-Traded Funds or ETFs are excellent assets for diversity in the portfolio of any Canadian investor.

They have lower costs than traditional mutual funds and can often be bought with zero trading commissions on platforms like Wealthsimple Trade or Questrade.

In this review, I will talk about XEF and its holdings, performance, fees, comparisons to other popular ETFs, and pros and cons.

What is XEF?

XEF is an ETF from the popular iShares line of funds from Blackrock.

XEF is designed to track the benchmark MSCI EAFE Investable Market index. There is also a hedged version of XEF that trades under the ticker symbol XFH.

XEF is a low-cost, long-term growth investment that provides Canadian investors with exposure to Europe, Australia, and Asia.

It has a medium risk rating and is 100% invested in individual stocks.

Key facts for XEF as of April 2022 include:

  • Inception date: April 10, 2013
  • Number of stocks: 2,608
  • Price/Earnings Ratio: 14.5x
  • Price/Book Ratio: 1.74x
  • Management fee: 0.20%
  • MER: 0.22%
  • Assets under management: $5.0 billion
  • 12-month trailing yield: 2.64%
  • Distribution yield: 2.52%
  • Distribution frequency: Semi-Annual
  • Eligible accounts: RRSP, TFSA, RRIF, TFSA, DPSP, RDSP
  • Currency: CAD
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XEF Holdings

XEF is a 100% stock fund with a total of 2,608 stocks from various markets around the world.

The XEF ETF has a medium risk rating and trades on the Toronto Stock Exchange.

Here are the top ten holdings of XEF:

Ticker SymbolStock NameAllocation
NESNNestle SA1.98%
ROGRoche Holdings PAR AG1.58%
ASMLASML Holding NV1.35%
AZNAstrazeneca PLC1.17%
SHELShell PLC1.15%
NOVNNovartis AG1.07%
NOVO BNovo Nordisk Class B1.07%
BHPBHP Group Ltd1.04%
MCLVMH1.01%
7203Toyota Motor Corp0.94%

And here is the exposure breakdown for XEF by country:

CountryAllocation
Japan22.17%
United Kingdom15.85%
France9.96%
Switzerland9.80%
Australia8.55%
Germany7.63%
Sweden4.04%
Netherlands3.92%
Hong Kong2.75%
Denmark2.60%


Given the large number of stocks that XEF holds, it is no surprise that each stock has a very minimal allocation in the fund.

Japan leads the way with 22.17% of the stocks in XEF, followed by the United Kingdom with 15.85%.

Related: Best Canadian REIT ETFs.

XEF Returns and Performance

You can easily track the performance of XEF since its inception. iShares allows you to look at the NAV price and index performance on an annual and cumulative basis.

YearTotal Return
201717.69%
2018-6.62%
201916.15%
20206.49%
202110.05%

On an average annualized basis, the return from XEF has been 8.08% since inception. On a cumulative basis, XEF has returned 100.85%.

Of course, historical returns are not indicative of future performance for any asset.

XEF Fees

XEF has a management fee of 0.20% and a management expense ratio or MER of 0.22%.

While it isn’t the lowest that iShares offers, it is very reasonable considering it holds so many international stocks. The fees are also much lower than a traditional mutual fund.

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Pros and Cons of iShares XEF

XEF offers an incredibly diverse portfolio exposure to stocks from Asia, Europe, and Australia, without foreign exchange fees.

The MER is quite reasonable considering the number of international stocks. It is much lower than an international stock mutual fund in Canada.

With over 2,608 stocks in the fund, you will never have to worry about choosing a few specific equities to invest in.

XEF is easy to take advantage of on discount brokerages like Wealthsimple Trade and Questrade, which offer zero commission ETF buying.

With that being said, with a 100% stock fund, you don’t want XEF to be the only holding in your brokerage account.

XEF vs VIU

VIU is the FTSE Developed All Cap ex North American Index ETF from investing giant, Vanguard Canada.

VIU provides exposure to emerging markets outside of North America, and a total of 3,887 assets with an MER of 0.23%.

A majority of VIU is based in Europe and Asia, with a 59.0% allocation to European markets and a 40.10% allocation to Asian markets.

Learn more about it in this VIU review.

XEF vs XIC

XIC is another ETF from iShares Canada and tracks the Canadian equities market. It is the S&P/TSX Capped Composite Index ETF.

XIC was established back in 2001 and holds 239 different Canadian stocks with an MER of 0.06%.

XIC has a very low MER and provides a broad sector exposure to the largest Canadian stocks on the Toronto Stock Exchange.

Learn more in this detailed XIC review.

XEF vs XAW

XAW is the iShares Core MSCI All Country World ex Canada Index ETF. It tracks nearly every major market in the world aside from Canada.

XAW is an asset allocation fund, meaning it holds a basket of other iShares ETFs. Its largest holding is IVV, the iShares Core S&P 500 ETF with a 53.59% allocation in the fund.

XAW holds 6 different ETFs which hold a total of 9,337 underlying assets. It has an MER of 0.22% with 62.29% of the investments in the US market.

XAW is also a hedged ETF, meaning it holds both Canadian and US dollars that can act as a hedge for volatile currency fluctuations.

Learn more in this XAW ETF review.

How to Buy the iShares XEF ETF in Canada?

Questrade

Questrade is a popular discount brokerage service for Canadian investors. With an intuitive mobile and desktop platform, Questrade is able to provide zero-commission buying for ETFs.

It does charge $4.95 to sell ETFs, which is a great incentive to hold ETFs like XEF for the long term.

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Wealthsimple Trade

Wealthsimple Trade is another popular discount brokerage that specifically targets young investors and millennials to begin investing.

Wealthsimple Trade offers zero-commission stock and ETF trading for Canadian assets, making it an ideal site to use for new investors.

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Is XEF a Good Buy?

XEF is an excellent investment for Canadian investors who are looking for exposure to international markets without having to pay foreign exchange fees.

The XEF ETF has a very adequate MER for the Canadian ETF industry at only 0.22%. This means that for every $1,000 you have invested in XEF, you pay $2.20 per year.

XEF is a very well-diversified fund with over 2,600 stocks from various different markets across Asia, Europe, and Australia.

It offers a good opportunity for Canadian investors to invest in emerging markets outside of North America.

XEF ETF Review FAQs

Is XEF a Good Investment?

Since its inception, XEF has had an average annual return of 8.08% which generally trails the average return of the benchmark S&P 500 index in the US. Still, for Canadian investors who are overexposed to Canadian and US markets, XEF offers a nice way to diversify their portfolio with low MER fees.

Does XEF Hold Stocks Directly?

Yes, XEF is an all-stock portfolio. It holds 2,608 different stocks from various markets around the world. Its highest allocation is to Japan and then the United Kingdom.

Is XEF a Hedged ETF?

XEF is not a hedged ETF so it contains all stocks and no currencies to offset fluctuations in currency value. If you are looking for a hedged version of the iShares XEF ETF, check out the iShares XFH ETF. This has the same stocks offered but also includes currencies like the JPY/CAD and the GPB/CAD.

Does XEF Pay Dividends?

Yes, XEF pays a semi-annual distribution to its investors. XEF has an annualized distribution yield of 2.52% as of April 8th, 2022. This is a fairly standard distribution yield for iShares ETFs. International stocks do not always have the same focus on dividends as North American companies. Still, XEF provides a solid return, albeit on a semi-annual basis which means twice per year.

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Author

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Enoch Omololu

Enoch Omololu is a personal finance expert and a veterinarian. He has a master’s degree in Finance and Investment Management from the University of Aberdeen Business School (Scotland) and has completed several courses and certificates in finance, including the Canadian Securities Course. He also has an MSc. in Agricultural Economics from the University of Manitoba and a Doctor of Veterinary Medicine degree from the University of Ibadan. Enoch has a passion for helping others win with their personal finances and has been writing about money matters for over a decade. He has been featured or quoted in The Globe and Mail, Winnipeg Free Press, Wealthsimple, Financial Post, Toronto Star, CTV News, Canadian Securities Exchange, Credit Canada, National Post, CIBC, and many other personal finance publications.

His top investment tools include Wealthsimple and Questrade. He earns cash back on purchases using KOHO, monitors his credit score for free using Borrowell, and earns interest on savings through EQ Bank.

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