Understanding the MSCI All Country World Index (ACWI)
The MSCI All Country World Index (ACWI) is a global stock index managed by Morgan Stanley Capital International (MSCI). It includes nearly 3,000 companies from 23 developed countries and 25 emerging markets. This index is widely used by fund managers for asset allocation and as a benchmark for global equity funds.
Basics
The MSCI All Country World Index is a comprehensive stock market index designed to gauge the performance of global equity markets. It is administered by Morgan Stanley Capital International, a renowned provider of investment indices and analytics.
Index Composition
The MSCI ACWI is a diverse index, encompassing stocks from nearly 3,000 companies representing 23 developed countries and 25 emerging markets. This broad spectrum of inclusion provides a comprehensive view of the global equity landscape.
Utilization in Asset Management
Fund managers frequently turn to the MSCI ACWI as a valuable tool for asset allocation. It serves as a reference point for assessing the performance of global equity funds, helping investors make informed decisions about their investment strategies.
Investment Products
The MSCI ACWI index serves as the foundation for various investment products, particularly exchange-traded funds (ETFs). These ETFs aim to replicate the performance of the index, offering investors an opportunity to gain exposure to a wide range of global equities cost-effectively.
MSCI ACWI: ETFs vs. Direct Purchase
Investors typically cannot directly purchase an index like the MSCI ACWI. Instead, they invest in ETFs that closely mimic the index's composition and performance. A prime example is Blackrock's iShares MSCI ACWI ETF. Below, we compare these two investment options while highlighting some of their key country, sector, and portfolio holdings.
Country and Sector Weightings
The MSCI ACWI index's country weightings, as of December 31, 2021, are as follows:
- United States: 61.31%
- Japan: 5.54%
- China: 3.62%
- United Kingdom: 3.60%
- Canada: 2.90%
Additionally, the sector weightings for the same date are:
- Information Technology: 23.58%
- Financials: 13.86%
- Consumer Discretionary: 12.40%
- Health Care: 11.69%
- Industrials: 9.64%
- Communication Services: 8.58%
- Consumer Staples: 6.80%
- Materials: 4.67%
- Energy: 3.40%
- Utilities: 2.70%
- Real Estate: 2.70%
Top Holdings
The MSCI ACWI index's top ten holdings, along with their respective portfolio weightings as of December 31, 2021, are:
- Apple Inc: 4.18%
- Microsoft Corp: 3.42%
- Amazon.com: 2.16%
- Tesla: 1.27%
- Alphabet A: 1.24%
- Alphabet C: 1.19%
- Meta Platforms A: 1.14%
- Nvidia: 1.05%
- Taiwan Semiconductor Mfg: 0.78%
- UnitedHealth Group: 0.67%
Collectively, these top ten holdings constitute 17.10% of the index's total weighting.
MSCI ACWI Alternatives for Global Equities
One option for investors who desire greater geographical diversification is to explore alternatives to the MSCI ACWI. One option is to allocate a portion of their investments to an ETF tracking the MSCI ACWI All Cap Index. This broader index includes over 15,000 equity holdings from 23 developed markets and 25 emerging markets, offering exposure to a more extensive array of global stocks, including numerous small and mid-cap stocks.
It is essential to acknowledge that indices containing foreign equities may also include U.S. stocks. As a result, investors should monitor their exposure to U.S. equities, especially if a substantial portion of their portfolio is already allocated to such assets. To devise the most suitable asset allocation strategy aligned with individual investment needs and long-term financial objectives, consulting a qualified financial advisor is advisable.
Conclusion
The MSCI All Country World Index is a comprehensive global stock index widely used by fund managers for asset allocation and as a benchmark for global equity funds. Its broad spectrum of inclusion provides a comprehensive view of the global equity landscape. Investors seeking greater geographical diversification may explore alternatives to the MSCI ACWI, including ETFs tracking the MSCI ACWI All Cap Index. However, investors should monitor their exposure to U.S. equities, especially if a substantial portion of their portfolio is already allocated to such assets.