SPDR MSCI EAFE StrategicFactors ETF QEFA puts together a portfolio of foreign developed-markets stocks that are cheap, fundamentally sound, and stable, all for a low cost. These traits give the portfolio a defensive stance, but one that should continue to outperform the MSCI ACWI ex USA Index on a risk-adjusted basis over the long term.

This multifactor fund equally allocates to three subindexes from the MSCI EAFE Index universe, combining the value, quality, and minimum-volatility factors. The value sleeve reweights the foreign-developed market using fundamental metrics, including book value, sales, earnings, and cash earnings, effectively overweighting stocks with lower prices relative to these fundamental measures. The quality sleeve incorporates stocks with a combination of high return on equity, low debt, and stable earnings. Finally, the minimum-volatility sleeve optimizes for the least-volatile portfolio given a set of constraints. Each factor independently has its own investment merit.

In combination, these three factor sleeves result in a well-diversified portfolio with only 16% of assets in its top 10 holdings. However, diversifying factor exposures tends to water each down. the quality and low-volatility factors overlap to the extent that stocks fitting the bill for both tend to be consistently profitable with low debt levels, leading to a less risky profile than the market. The value sleeve pulls the portfolio from a growth tilt back into blend territory. Combining these three factors results in a defensive tilt that keeps risk in check while improving the fund's chances of outperforming the MSCI ACWI ex USA Index on a risk-adjusted basis.

So far, the fund has lived up to that expectation. On average, it has been less volatile than the market and held up better during drawdowns. For example, it beat the MSCI ACWI ex USA Index by 3 percentage points during the coronavirus-driven drawdown during February and March 2020. Cutting back on risk has been a good strategy in foreign markets over the past several years as it helped the fund outperform the Morningstar Category Index by 1.20 percentage points annualized from its June 2014 inception through August 2023.

Analyst Rating

A solid multifactor approach to foreign developed markets.

Director

Bryan Armour

ASML Hld

National Energy Services Reunited

AstraZeneca

Novan

Rogers

Moelis

BHP Billiton

GlaxoSmithKline

Shell PLC

TotalEnergies SE

This multifactor fund draws from the MSCI EAFE Index and offers exposure to a trio of factors: quality, low volatility, and value. Tapping into well-vetted factor exposures should provide the fund with an edge over its category index in the long run, meriting an Above Average Process Pillar rating.

The portfolio managers use a sampling technique to track the MSCI EAFE Factor Mix A-Series Index. This index equally weights three subindexes that focus on different factors: the MSCI EAFE Quality Index, the MSCI EAFE Value Weighted Index, and the MSCI EAFE Minimum Volatility Index.

Above Average

Process

SSGA's Global Equity Beta Solutions team manages this strategy. Its global trading desks and supporting technology enable accurate and cost-effective index tracking, which supports an Above Average People Pillar rating.

Karl Schneider and Lisa Hobart continue as the named managers on this portfolio. Schneider is the deputy head of the team, having joined SSGA in 1997, while Hobart is a vice president and senior portfolio manager who joined the firm in 2006 and started working on this strategy in 2019.

Mike Feehily, the longtime co-head of Global Equity Beta Solutions and manager of this strategy, left the asset-management industry in March 2023. His departure does not erode confidence in this team's ability to effectively track the index. Schneider and Hobart have the experience to absorb the responsibility, and the deep trove of portfolio managers and analysts they oversee remains intact. Portfolio managers do not personally invest in this strategy, but part of their variable compensation is linked to index tracking, aligning their interests and investors’.

People

State Street Global Advisors is under new leadership but continues to move along the positive trajectory established by former leaders. SSGA maintains its Above Average Parent Pillar rating.
Cyrus Taraporevala, who oversaw much of SSGA’s recent transformation, retired from the CEO position in December 2022 and passed the baton to his successor, Yie-Hsin Hung. She inherited a business that’s become more disciplined with its fund lineup. Fees have come down, while product development remains focused on fixed-income and sustainability funds, and many of SSGA’s launches have echoed that intention.
The seeds that SSGA planted over the past several years have been bearing fruit. It built out a low-cost series of portfolio building-block ETFs in the U.S. bearing the “SPDR Portfolio” branding. SSGA launched these later than its industry rivals, so they aren’t as large. But they’re competitive, with solid management and low fees, which helped them consistently take in new money over the past several years.
SSGA continued to overhaul its ETF business in Europe with most of its recent fixed-income and sustainability fund launches. Many of these funds track indexes and charge relatively low fees. With operations in the U.S. and Europe standing on a firm foundation, SSGA will put more focus on its Asia-Pacific business—the smallest regional segment of its business.

Parent

SPDR MSCI EAFE StrategicFactors ETF

QEFA tracks an index of securities from developed markets in Europe, Australia and the Far East. The index equal-weights 3 subindexes: value, minimum volatility and quality.

The SPDR MSCI EAFE StrategicFactors ETF (QEFA) made its debut on 06/04/2014, and is a smart beta exchange traded fund that provides broad exposure to the Broad Developed World ETFs category of the market.

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