What is MSCI EAFE ADR Index?

What is MSCI EAFE Expanded ADR Index?

The MSCI EAFE Expanded ADR Index aims to target the performance of large and mid-cap companies in MSCI EAFE Index i.e., its parent index, represented by their corresponding American Depositary Receipts (ADRs). The eligible universe comprises Level I, II and III ADRs traded on the New York Stock Exchange or the NASDAQ.

This new universe represents an expansion of our ADR coverage, from listed ADRs only to also include over-the-counter (OTC) securities. In this expanded universe, the number of securities is almost 400 covering +70% of the market capitalization of the standard MSCI EAFE index (as of 31st August 2022).

By having such an extensive coverage, the MSCI EAFE Expanded ADR Index has similar country and sector exposures to the MSCI EAFE Index.


MSCI EAFE ADR Index - content

Why MSCI EAFE Expanded ADR Index?

Building on our flagship index construction framework, we can now offer to US-based investors access to international markets using only US securities.

This will be a key index for asset and wealth managers looking to create personalised portfolios for US investors, which will complement existing domestic allocations.

For portfolio managers it may also help provide some efficiency gains, as the OTC ADR universe included in this index, has been screened for both liquidity and tradability, applying MSCI rigorous and market leading data governance processes.

 

How is the index constructed?

The MSCI EAFE Expanded ADR Index is part of a new index family, the MSCI Expanded ADR Indexes, which is based on our GIMI methodology. The MSCI EAFE Expanded ADR Index is constructed by substituting the constituents of the MSCI EAFE Index with ADRs from the eligible universe using a liquidity-based screening process.

The eligible universe comprises Level I, II and III ADRs traded on the New York Stock Exchange or the NASDAQ. The index will be reviewed on quarterly basis to coincide with the regular Semi-Annual and Quarterly Index Reviews of the MSCI Global Investable Market Indexes.


MSCI EAFE ADR graphic

Different ADR issues represent adherence to different regulatory standards:

Increase in registration requirements

  • Level 1
    • Minimum registration requirements imposed by the SEC

    Trades over the counter

  • Level 2
    • Full registration requirements imposed by the SEC

    Trades in exchange

  • Level 3
    • Full registration requirements imposed by the SEC
    • Can also raise capital through a public offering in the US

    Trades in exchange

For the first time in our DR Indexes, level 1 ADR issues are included, substantially increasing coverage.

As of March 2022, EAFE ADR coverage went from 43 to 370 by including level 1 ADR issues.


MSCI EAGE ADR Index - benefits

Index benefits

  • Track all American depositary receipts (level I, II and III) representing shares in companies within the EAFE universe, subject to size and liquidity requirements
  • Provide easier access to international markets for US-based investors, potentially offering diversification benefits
  • Potential implementation efficiencies, by mapping the ADR universe and incorporating liquidity and investability criteria in the index construction

Download methodology
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Factsheets


MSCI EAFE ADR Index - related content cards