The MSCI ACWI represents the full opportunity set of large- and mid-cap stocks across 23 developed and 27 emerging markets, comprising approximately 3000 constituents across 11 sectors. While the MSCI World (which only invests in developed markets) is the better-known index to South African investors, the MSCI ACWI is more widely used internationally, with more than $4.1trn benchmarked against it globally, compared to the R3.6trn benchmarked against MSCI World.1 

MSCI ACWI Benefits

The MSCI ACWI is a compelling way for South African investors to access global equity exposure for these reasons: 

  1. “Real economy” global equity exposure – Emerging Markets (EM) make up over one-third of world GDP and should be represented in a truly global equity investment strategy. EM makes up around 13% of the MSCI ACWI
  2. Diversification – This index offers efficient exposure to a broad range of countries, sectors and companies around the globe. Investors can access an increased number of shares and better geographic diversification than by investing in a product tracking the MSCI World.
  3. Correlation benefits with SA Equities – Whilst SA is part of the emerging markets basket, it is not a perfect proxy for emerging markets exposure and can vary significantly at times. South African investors can benefit from the exposure to other emerging markets offered by the MSCI ACWI (which is largely weighted towards emerging Asia, most notably China at approximately 5%).
  4. Exposure to high growth economies – Investors are rewarded when making EM allocations as the risk premium typically leads to an outperformance over developed markets over time.

MSCI ACWI Country Composition

MSCI ACWI Country Composition
Source: MSCI, October 2020

MSCI ACWI Q4 2020 Update

  • After the jitters during October, the markets went on to end the year on a positive note as developed markets started rolling out multiple COVID-19 vaccines, the US signed a new fiscal stimulus bill and the UK and European Union finally reached an agreement for the British exit. Emerging markets outperformed global developed markets as “risk on” sentiment prevailed.
  • Global equity returns for the quarter ended 31 December 2020 were strongly positive: MSCI World (Developed Markets only) up 13.96%, Emerging Markets up 19.77% and, as a result, the MSCI ACWI (which includes ~13% allocation to EM) up 14.79% (= 0.83% ahead of MSCI World).
  • A key take-out is that Emerging Markets bucked the trend of negative Developed Markets returns during October, which highlights the benefit of the additional diversification of ACWI (including both EM and DM) vs MSCI World (DM only). The benefit of including the Emerging Market component (by choosing to invest in ACWI instead of MSCI World) brings additional diversification and sources of return and will continue to add value in terms of risk and return going forward.
  • The CoreShares MSCI ACWI Fund is a cost-effective way to invest in this index, carrying a modest retail management fee of 0.25%. We received strong inflows into the CoreShares MSCI ACWI Fund of Funds in December 2020, and the fund’s AUM as of 11th Jan was R933m. Learn more here.

 

Source: Morningstar Direct. Past performance is not an indication of future performance. Calculation of returns over the period 01 Oct 2020 to 31 Dec 2020

 

Q4 2020 performance
Source: Morningstar Direct. Past performance is not an indication of future performance. Calculation of returns over the period 01 Oct 2020 to 31 Dec 2020

 

1. Source: MSCI website, March 2018