What Is the MSCI All Country World Index (ACWI)?

What Is the MSCI All Country World Index (ACWI)?

Let me explain the MSCI All Country World Index (ACWI) directly to you: it's a stock index created to monitor broad global equity-market performance. Maintained by Morgan Stanley Capital International (MSCI), this index includes stocks from nearly 3,000 companies across 23 developed countries and 24 emerging markets, based on data as of December 29, 2023.

Fund managers rely on the MSCI ACWI as a reference for asset allocation and as a benchmark to evaluate the performance of global equity funds. You'll also find it used as the foundation for investment products like exchange-traded funds (ETFs).

Key Takeaways

Here's what you need to know about the MSCI ACWI: it tracks nearly 3,000 stocks in 47 developed and emerging market countries, with approximately $4.3 trillion in assets benchmarked to it as of June 30, 2023. I want to point out that it's commonly used as a benchmark for global equity funds and as a guide for asset allocation. As an individual investor, you can access it through ETFs that replicate its performance.

Understanding the MSCI All Country World Index (ACWI)

You have various options to diversify your portfolio holdings. For instance, a portfolio manager or you as an investor could buy a selection of individual stocks that show low or negative correlation with each other.

That said, a more cost-effective and efficient approach might be to hold ETFs that replicate the performance of an index like the Dow Jones Industrial Average (DJIA) or the S&P 500. If you're looking for exposure to global stocks, I recommend considering the MSCI ACWI index as a solid option.

Institutional investors, such as those managing mutual funds and pension funds, use the MSCI ACWI as a benchmark to assess their portfolio performance and as a guide for geographical diversification. You, as an individual investor, can also use the ACWI to compare funds and identify those with the best risk-adjusted returns.

Country and Sector Weightings

As of December 29, 2023, the countries with the highest allocations in the MSCI ACWI index include the U.S. at 62.57%, Japan at 5.4%, China at 3.62%, the United Kingdom at 3.55%, and France at 2.9%. Turning to sectors, the weightings are as follows: Information Technology at 22.93%, Financials at 15.92%, Healthcare at 11.24%, Consumer Discretionary at 11.08%, Industrials at 10.65%, Communication Services at 7.34%, Consumer Staples at 6.76%, Energy at 4.54%, Materials at 4.53%, Utilities at 2.62%, and Real Estate at 2.38%.

Additional Details on Top Holdings

These top 10 holdings account for 18.36% of the index's total weighting.

How to Invest in the MSCI ACWI Index: iShares MSCI ACWI ETF

You can't buy the MSCI ACWI index directly because it's simply a measure of performance and characteristics across sectors, countries, and equity holdings.

Instead, invest in an ETF that tracks or mirrors the index's composition and performance. One such ETF is BlackRock's iShares MSCI ACWI ETF, which manages nearly $18.3 billion in assets as of January 18, 2024.

This ETF holds stocks from 2,340 of the index's holdings and carries an expense ratio of 0.32% as of January 18, 2024—this is the cost you pay for BlackRock to manage the fund.

The iShares ETF matches the same sectors and nearly all the top 10 holdings (with Eli Lilly replacing JPMorgan) at similar weightings to the MSCI ACWI index as of January 18, 2024. Here's a comparison of performance as of December 31, 2023: the ETF returned 22.22% over one year, 5.75% over three years, and 11.76% over five years, while the index returned 22.20%, 5.75%, and 11.72% respectively.

Alternatives to the MSCI ACWI for Global Equities

If you're aiming to diversify your portfolio geographically, consider allocating some funds to an ETF tracking the MSCI ACWI All Cap Index, which includes over 15,000 equity holdings from 23 developed and 24 emerging markets. This gives you exposure to a broader range of global stocks, including many more small and mid-cap companies.

Keep in mind that indexes with foreign equities often include U.S. stocks as well, so monitor your portfolio to avoid overexposure to U.S. equities if you've already invested heavily there. I advise consulting a qualified financial advisor to tailor the best asset allocation strategy to your needs and long-term goals.

How Do You Invest in the MSCI ACWI Index?

You cannot invest directly in the MSCI ACWI index since it's not a fund—it's just an index. However, you can invest in funds that track it, like the iShares MSCI ACWI ETF, which you purchase through your brokerage account just like any other stock or ETF.

What Is the Difference Between the MSCI ACWI Index and the MSCI World Index?

Both the MSCI ACWI and MSCI World indexes offer exposure to multiple countries and over 1,000 equity holdings, but the key difference is that the World index covers only developed markets, while the ACWI includes both developed and emerging markets.

Does the MSCI ACWI Include China?

Yes, the MSCI ACWI index includes shares from China—in fact, MSCI increased its index weights for China in 2019.

The Bottom Line

If you're seeking exposure to both domestic and international markets across a large number of companies, funds tracking the MSCI All Country World Index will provide that. The index spans developed and emerging countries, totaling nearly 50 nations, which allows for extensive diversification.