SCHF tracks the FTSE Developed ex US Index, providing broad exposure to large and mid-cap companies across Europe, Japan, Australia and other developed markets outside the US and Canada. At 0.03% expense ratio — the cheapest international ETF available — SCHF is essentially the developed international market equivalent of VTI in terms of cost efficiency. The portfolio is heavily weighted toward European markets (UK, France, Germany, Switzerland, Netherlands) and Japan, which together represent the majority of developed ex-US market capitalization. Currency exposure is unhedged, meaning returns are affected by dollar strength or weakness relative to the euro, yen and pound. International developed markets have traded at significant valuation discounts to US equities for an extended period, which provides a mean reversion argument for including international exposure. They also provide portfolio diversification since international equity returns are not perfectly correlated with US returns. For investors, SCHF is the most efficient available vehicle for developed international equity exposure, appropriate as a portfolio diversifier that reduces US concentration risk, captures potentially undervalued international markets and adds currency diversification to a predominantly dollar-denominated portfolio.
