It’s quite simple: You don’t want to spend a long time dealing with all the securities and ETF stuff and still invest your money? Then the MSCI ACWI or advertised “MSCI All Country World Index” could be right for you.
What is the MSCI ACWI?
The index contains 2,757 companies from 47 countries. 23 of them are industrial countries and 24 emerging markets. According to the factsheet, the index covers 85% of the global market.
However, the All Country World does not weight “fairly”. Companies from the USA account for just under 55 % of the index. The sectors include in particular the financial sector with 17.21% and IT with 15.33%. The “real estate” sector is the smallest at 3.17%.
The top ten companies in the index are currently:
- Apple
- Microsoft
- Amazon
- Johnson & Johnson
- Alphabet C
- JPMorgan Chase & Co
- Alphabet A
- Mobile Corp.
- nestle
In general, smaller companies are underweight.
Let’s summarize: The MSCI ACWI combines the MSCI World and MSCI Emerging Markets, with the emerging markets playing a minor role. In terms of country weighting, there is a US overhang. It is important to note that the emerging markets were previously included in the index at around 9 – 12 %.
…and the yield?
In the 3, 5 and 10-year comparison (as at 28 February 2019), the return was 12.87 percent, 6.28 % and 12.73 % respectively, twice below the development of the MSCI World. Performance depends on the performance of the emerging market, especially if you look at the annualised performance in the factsheet. That’s why I call the All Country an “opportunity-oriented index”. If you want to cut yourself off from the yield cake of the new markets, that is possible with this index. That would take us to the next step.
Which ETFs are there that map the MSCI ACWI?
All we’ve done now is look at the index. But the index still has to be mapped. Fortunately, there are 4 ETFs that can be used:
- iShares MSCI ACWI UCITS ETF (Acc)
- Lyxor MSCI All Country World UCITS ETF Acc (EUR)
- SPDR MSCI ACWI UCITS ETF
- Xtrackers MSCI AC World Index UCITS ETF 1C
The ETFs differ as a product in the weighting of countries and sectors. The Lyxor is a swap and therefore the default risk tends to be higher, with the risk being limited to 10% of the net value. However, as a rule the index can be mapped more efficiently. Optimised sampling is to be preferred as additional security. The ETFs have a representative number of equities in their assets. However, this may lead to deviations from the index.
Which ETF to choose?
Which of the 4 ETFs should you choose now? Here not only the (historical!) performance should be considered, but also the costs. Taxwise the funds are no problem – in Austria the earnings are taxed immediately at a domestic bank, in Germany the lump-sum taxation takes effect to my knowledge. The fund domiciles are also tax-efficient. The high fund volume of the ishares would therefore provide security, but this ETF also costs 0.60%. The latter 2 would be more favourable here. Lyxor has the swap disadvantage. Personally, I would tend towards the 3 samplers.
Of course I can’t take the selection off your hands. Look through factsheets and info and compare, then select based on all info. It’s not that hard anymore. The advantage of the MSCI ACWI ETFs is that you only have to cover “everything” with one fund and you don’t have to deal even more intensively with the “right” ETF selection. Nevertheless, it should be borne in mind that you have a US overhang and the emerging markets are represented with approx. 10%. With several ETFs this is of course better controllable. However, the ETFs mentioned in this article can be a solid vehicle for an efficient old-age provision, with which a fortune can be built up happily and without great effort.