International small cap

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Flag of the United States.svg.png This article contains details specific to United States (US) investors. Acting on fund or ETF suggestions in it may have harmful US tax consequences for non-US investors.

Since US large-cap stocks and international large-cap stocks have high correlation, some investors look for international small cap mutual funds and ETFs to further diversify their portfolios. This page is intended to present a summary of international small cap mutual funds and ETFs.


Since new ETFs open regularly, this list is not complete. It includes the major ETFs and mutual funds, but excludes those which are unlikely to be of interest to most investors because they are very expensive, or very small and thus expensive to trade.

Name Markets Weighting Expense
Spread [2]
Volume [3]
Mkt Cap [4]
Assets [5]
VFSAX Vanguard FTSE All-World ex-US Small-Cap Index Fund Admiral Shares All Market cap 0.16% N/A N/A $2.18B $7.0B
VSS Vanguard FTSE All-World ex-US Small-Cap Index Fund ETF All Market cap 0.11% 0.12% $18.65M $2.18B $7.0B
VINEX Vanguard International Explorer Fund All Active 0.39% N/A N/A $3.2B $2.6B
GWX SPDR S&P International Small Cap Developed Market cap 0.40% 0.34% $785M $1.04B $785M
SCZ iShares MSCI EAFE Small Cap Index Developed Market cap 0.40% 0.02% $87.8M $2.59B $11.1B
SCHC Schwab International Small Cap Developed Market cap 0.11% 0.06% $9.90M $2.45B $3.02B
DLS WisdomTree International SmallCap Dividend Developed Dividend 0.58% 0.11% $5.06M $1.65B $1.39B
FNDC Schwab Fundamental International Small Company Index Developed Fundamental 0.39% 0.12% $5.34M $3.77B $2.16B
SFILX Schwab Fundamental Small Company Index Fund Developed Fundamental 0.39% N/A N/A $2.38B $702M
PDN PowerShares FTSE RAFI Developed Markets exUS S/M Developed Fundamental 0.49% 0.23% $911K $3.96B $371M
AVDV Avantis International Small Cap Value ETF Developed Active value 0.36% 0.13% $2.14K $2.00B $395M
ISCF iShares Edge MSCI Multifactor International Small-Cap ETF Developed Multifactor 0.40% 0.26% $602K $1.94B $157M
EWX SPDR S&P Emerging Markets Small Cap Emerging Market cap 0.65% 0.18% $1.95M $1.05B $589M
EEMS iShares MSCI Emerging Markets Small Cap Emerging Market cap 0.71% 0.42% $1.29M $1.40B $241M
DGS WisdomTree Emerging Markets Small Cap Dividend Emerging Dividend 0.63% 0.15% $6.02M $1.33B $1.72B


Tracking error

Since these ETFs trade in illiquid stocks, many of them only sample the indexes they track, and they incur transaction costs when the indexes change. Therefore, the ETFs do not necessarily track the index well; deviations of 1% annually are common. EWX underperformed its index by about 3% annually through 2012, was close in 2013-2015, outperformed the index in 2016-2018, and underperformed again in 2020. (This tracking error is based on the net asset value; when you buy or sell an ETF, this may add to the tracking error because these ETFs frequently trade at a premium or discount to net asset value.)

Tax efficiency

Vanguard International Explorer Fund has been very tax inefficient at least for the past 10 years, and since it is actively managed and is not an ETF, it is likely to remain tax-inefficient, You should strongly consider holding it in a tax-advantaged account. Similarly, Schwab Fundamental Small Company Index Fund has distributed some capital gains, and is likely to distribute more because of fund turnover; in a taxable account, use the analogous ETF instead, which has never distributed a capital gain and it not likely to. The actively-managed AVDV is an ETF, so it is less likely to distribute capital gains.

Small-cap international ETFs tend to distribute more capital gains than other ETFs, possibly because there is less creation/redemption activity. Some foreign countries, particularly emerging markets, do not allow in-kind redemptions, eliminating the tax benefit from the redemption process. [6] Small-cap ETFs should be less likely to distribute gains after several years of operation, because the redemption process is more effective at reducing gains when shares have been purchased at a wide range of prices. As of 2020, only the SPDR ETFs GWX and EWX have distributed gains after the second year.

GWX has has the largest distributions; it distributed a 1.5% short-term gain in its first year (2007), an 0.8% long-term gain in 2011, a 2.7% short-term and 7.5% long-term gain in 2014, an 0.5% short-term and trivial long-term gain in 2015, an 0.8% short-term and 0.5% long-term gain in 2016, and a 2.0% short-term and 0.9% long-term gain in 2019. EWX distributed a 1.5% short-term gain in its second year (2009), a 2.1% short-term and 0.5% long-term gain in 2010, and a 1.3% short-term and 2.2% long-term gain in 2011. VSS distributed a 0.7% short-term gain in its first year (2009) and 0.4% short-term and 0.4% long-term in its second year (2010). DLS distributed an 0.8% short-term gain in its second year (2007).

Independent of capital gains, DLS and DGS are likely to have higher tax costs than the other ETFs, because their indexes overweight stocks with a higher dividend yield. AVDV, an actively managed value fund, is also likely to have a higher dividend yield.

Trading costs

Many of the ETFs above are thinly traded, and even those which have fairly high volume have larger-than-average bid/ask spread because the value of the underlying stocks is more difficult to estimate.

Underlying securities

The products above have quite different sets and weights of underlying securities. Because of different definitions of developed and emerging markets, two indexes in the same market segment may have different country holdings. Even within the same countries, market-cap-weighted indexes have different country weights because of different definitions of small-cap by country. You are strongly advised to read the prospectus of each product and, if necessary, do additional research before investing in any of the products above.

International developed markets small cap index returns

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Indexes: Dow Jones Developed Markets Small Cap Total Stock Market Index; FTSE Developed Small Cap ex-North America Index; MSCI EAFE Small Cap Index; Russell Developed ex-U.S. Small Cap Index; S&P Developed Ex-U.S Small Cap Index

See also


  1. For ETFs, According to, as of 12/31/2020; for mutual funds, from the fund provider.
  2. 45-day average spread according to, as of 12/31/2020.
  3. 45-day average dollar volume according to According to, as of 12/31/2020.
  4. According to, as of 12/31/2020; VINEX data is from Vanguard as of 11/30/2020, SFILX data is from Morningstar as of 11/30/2020.
  5. According to, as of 12/31/2020. Vanguard data is from Vanguard and uses both share classes for VSS/VFSAX
  6. Fidelity, ETFs versus Mutual Funds, Tax Efficiency

External links