What Is the MSCI All Country World Index?
The MSCI All Country World Index (ACWI) is a stock index designed to track broad global equity-market performance. Maintained by Morgan Stanley Capital International (MSCI), the index comprises the stocks of nearly 3,000 companies from 23 developed countries and 25 emerging markets.
Fund managers use the MSCI ACWI as a guide for asset allocation and a benchmark for the performance of global equity funds. The index is also used as the basis for creating investment products such as exchange-traded funds (ETFs).
- The MSCI ACWI is a stock index that tracks nearly 3,000 stocks in 48 developed and emerging market countries.
- The components of the MSCI ACWI index have a combined market capitalization of more than $70 trillion.
- The MSCI ACWI index is used as a benchmark for global equity funds and as a guide to asset allocation.
- Individual investors can gain access to the index through ETFs that replicate its performance.
Understanding the MSCI All Country World Index
Investors can diversify their portfolio holdings in a number of ways. A portfolio manager or investor can purchase a range of individual stocks that have a low or negative correlation with each other.
On the other hand, a less costly and more efficient way to invest might be to own ETFs that replicate the performance of an index such as the Dow Jones Industrial Average (DJIA) or the S&P 500 index. For investors that also want to have exposure to global stocks, the MSCI ACWI index can be a good option.
Institutional investors, including those who manage mutual funds and pension funds, can use the MSCI ACWI as a benchmark to measure the performance of their portfolios and a guide to geographical diversification. Individual investors can also use the ACWI as a benchmark to compare which funds have the best risk-adjusted returns.
MSCI ACWI Index vs. iShares ACWI ETF
Typically, investors can't buy an index directly, such as the MSCI ACWI, since it's designed to represent a measurement of performance and characteristics of various sectors, countries, and equity holdings.
Instead, investors can buy an ETF that tracks or mirrors the composition and performance of the index. Below is a comparison between the MSCI ACWI index and Blackrock's iShares MSCI ACWI ETF, including some of the top country, sector, and portfolio holdings.
MSCI ACWI Index Country and Sector Weightings
The countries representing the highest total market cap for the MSCI ACWI index are the U.S. (61.31%), Japan (5.54%), China (3.62%), the United Kingdom (3.6%), and Canada (2.9%). Below are the weightings for each sector as of Dec. 31, 2021.
- Information Technology: 23.58%
- Financials: 13.86%
- Consumer Discretionary: 12.4%
- Health Care: 11.69%
- Industrials: 9.64%
- Communication Services: 8.58%
- Consumer Staples: 6.8%
- Materials: 4.67%
- Energy: 3.4%
- Utilities: 2.7%
- Real Estate: 2.7%
MSCI ACWI Index Top Holdings
Below are the top ten holdings by their portfolio weighting within the index as of Dec. 31, 2021:
- 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%
The top ten holdings represent 17.10% of the weighting for the index.
iShares MSCI ACWI ETF
One of the ETFs that track and invest in the MSCI ACWI index is Blackrock's iShares MSCI ACWI ETF, which has nearly $17.5 billion in assets under management (AUM) as of Jan. 25, 2022.
The ETF owns the stocks of 2,332 holdings from the index and has an expense ratio of 0.33% as of Jan. 25, 2022. The expense ratio represents the cost to investors for Blackrock to manage the fund.
The iShares ETF has the same sector and top ten holdings with nearly the same portfolio weightings as the MSCI ACWI index as of Jan. 25, 2022. Below is the fund's performance versus the MSCI ACWI index as of Dec. 31, 2021.
|MSCI ACWI index vs. iShares MSCI ACWI ETF Performance|
|iShares MSCI ACWI ETF||MSCI ACWI Index|
Alternatives to the MSCI ACWI for Global Equities
An investor seeking to diversify their portfolio geographically could invest a portion of their funds in an ETF that tracks the MSCI ACWI All Cap Index, which has more than 15,000 equity holdings from 23 developed markets and 25 emerging markets. This would provide exposure to a wide range of global stocks but include many more small and mid-cap stocks.
It's important to note that investors should be aware that an index containing foreign equities might also contain U.S. stocks. As a result, investors should monitor whether they'd be overexposed to U.S. equities if they have already allocated a significant portion of their portfolio to U.S. stocks. Please consult a qualified financial advisor to determine the best asset allocation strategy for your investment needs and long-term financial goals.