The MSCI EAFE Index and the MSCI EAFE IMI (Index Investable Market Index) are two of the most followed international stock indices. Many portfolios and investment vehicles are benchmarked to each index.
The MSCI EAFE Index and the MSCI EAFE IMI have some slight differences, but performance has been nearly identical. The below performance chart of the MSCI EAFE and MSCI EAFE IMI illustrates that the MSCI EAFE Index has outperformed the IMI version on a backtested basis. However, returns since the MSCI EAFE IMI’s inception have been nearly identical. This similar to the findings in my analysis of the Russell 1000 vs S&P 500 and MSCI EM vs MSCI EM IMI.
A quick note that investors cannot invest directly in an index. These unmanaged indexes do not reflect management fees and transaction costs that are associated with an investable vehicle, such as the iShares EAFE ETF (symbol: EFA) or the iShares Core EAFE ETF (symbol: IEFA). A reminder that these are simply examples as this site does NOT provide investment recommendations.
What is the difference between MSCI EAFE and MSCI EAFE IMI?
The MSCI EAFE IMI (Investable Market Index) is similar to the traditional MSCI EAFE Index (non-IMI), but it has many more constituent stocks and includes more exposure to mid-caps and small-caps.
What does MSCI EAFE IMI mean?
The IMI in “MSCI EAFE IMI” stands for “Investable Market Index” and connotes that it includes more stocks than the original EAFE index.
Historical Performance: MSCI EAFE Index vs MSCI EAFE IMI
The MSCI EAFE Index was launched way back in 1986, while the MSCI EAFE IMI Index was launched 21 years later in 2007. However, MSCI has provided backtested data that goes back about a dozen years before that. Since 1994, the MSCI EAFE Index has outperformed the MSCI EAFE IMI Index by about 1.25% per year (5.11% vs 3.86%, respectively). The cumulative performance differential over that time period has been over 120%!
However, when we chart the performance of MSCI EAFE vs MSCI EAFE IMI since 2007 (below), we find that performance has been nearly identical: 2.39% vs 2.30% annualized. The cumulative performance difference has been roughly 2%! I haven’t yet dug into the why this is (technically called performance attribution analysis), but it is a topic for future research. In the meantime, it is clear that the indices have performed identically since their common inception in 2007.
Composition Differences: MSCI EAFE Index vs MSCI EAFE IMI
Both the MSCI EAFE vs MSCI EAFE IMI indices are broad-based indices that represent the equity markets of developed nations. As of 12/31/2022, the indices have identical geographic exposures, similar sector weights, and slightly different market cap exposures.
Geography
The MSCI EAFE index and the EAFE IMI have identical country constituents, although the weight vary ever so slightly. Below are the weights of the top five countries.
| MSCI EAFE Index | MSCI EAFE Investable Market Index | |
| Japan | 21.94% | 23.36% |
| United Kingdom | 15.27% | 15.24% |
| France | 11.85% | 10.67% |
| Switzerland | 10.14% | 9.34% |
| Australia | 8.15% | 8.26% |
Market Capitalization
One of the main differences between the two indices is that the MSCI EAFE Investable Market Index (IMI) has many more constituents that the original MSCI EAFE Index. According to MSCI, the number of constituents is as follows:
| MSCI EAFE Index | MSCI EAFE IMI Index | |
| Constituent Stocks | 3,073 | 796 |
Additionally, the two indices have slightly different market cap exposures. Using the iShares EAFE ETF (which tracks the MSCI EAFE Index) (symbol EFA) and the iShares Core EAFE ETF (which tracks the MSCI EAFE IMI Index) (symbol IXUS) as proxies, we can infer the below market cap weights of each index.
| MSCI EAFE Index | MSCI EAFE IMI Index | |
| Large Cap | 88% | 77% |
| Mid Cap | 12% | 19% |
| Small Cap | 0% | 4% |
Sector Weights
Again, using EFA and IEFA as proxies, we can infer the index weights are very similar.
| MSCI EAFE Index | MSCI EAFE IMI | |
| Basic Materials | 8.01% | 8.11% |
| Consumer Cyclical | 10.74% | 11.15% |
| Financial Services | 18.74% | 17.74% |
| Real Estate | 2.72% | 3.86% |
| Communication Services | 4.90% | 4.79% |
| Energy | 4.90% | 4.60% |
| Industrials | 14.97% | 16.09% |
| Technology | 8.52% | 8.66% |
| Consumer Defensive | 10.05% | 9.43% |
| Healthcare | 13.30% | 12.47% |
| Utilities | 3.14% | 3.10% |
Final Thoughts on MSCI EAFE Index vs EAFE IMI
Investors cannot invest in indices directly and should do their own research before deciding to invest in a fund that tracks either index. That being said, these two indices appear nearly identical in terms of geographic, market cap, and sector exposure. For all intents and purposes, I would argue that these two benchmarks are interchangeable, despite the wide historical performance difference prior to 2007.
With such a small performance difference, the costs of actual investment strategies/vehicles may be a larger consideration than which benchmark to select. Sometimes benchmark selection matters quite a bit, although that does not appear to be the case between these two indices.
