The ACWI is developed and maintained by Morgan Stanley Capital International (MSCI) - a leading provider of investment decision support tools to clients ranging from large pension plans to boutique hedge funds.
Many exchange-traded funds (ETFs) use these indices as a basis for their holdings, which has made the acronym ubiquitous in the financial markets.
Why Investors Use the ACWI
Investors use the MSCI All Country World Index (ACWI) for a number of different reasons. First, the ACWI offers an easy and measurable way for investors globally diversify. Institutional investors can measure implied bets, quantify home biases and ensure a fully diverse portfolio, while individual investors can purchase global diversification in a single security.
Second, institutional investors often use the ACWI as a benchmark for their own portfolios. For instance, pension funds may have a mandate saying that they must be globally diversified. Their holdings are then compared to the ACWI in order to determine if they meet those objectives. Combined, these are the two most common uses of the ACWI.
Popular Variations of the ACWI
Morgan Stanley Capital International (MSCI) utilizes a number of different variations on its All Country World Index (ACWI).
Choosing the right variation depends on the situation. For instance, a U.S. investor looking to diversify into international stocks may want to choose an ex-US index, since he or she already has exposure to U.S. equities.
The three most popular variations are:
- MSCI ACWI IMI - The Investable Market Index covers approximately 9,000 securities across large, mid and small cap segments and across style and sector segments in 45 developed and emerging markets.
- MSCI ACWI All Cap Index - The All Cap Index covers approximately 14,000 securities including large, mid, small and micro cap developed markets together with large, mid and small cap segments of emerging markets.
- MSCI ACWI Ex Indices - The Ex Indices are used to exclude certain countries - usually the primary investor's home country - from the index, since these investors may already have significant exposure to their own country.
How to Invest in the ACWI
The easiest way for individual investors to gain exposure to the All Country World Index (ACWI) is through ETFs. Many different ETF providers utilize the ACWI in various forms, which means there are many different options available. But the three most popular providers are:
- iShares MSCI ACWI Index Fund (ACWI)
- iShares MSCI ACWI ex-US Index Fund (ACWX)
- SPDR MSCI ACWI ex-US ETF (CWI)
Since these funds use the same core index, investors should consider expense ratios and liquidity when deciding the best option. Expense ratios are important to consider since they directly affect annual reports, while liquidity is important to consider, especially when investing in shorter time horizons where timely selling is important.
Some Alternatives to the ACWI
While the MSCI All Country World Index (ACWI) may be the most popular, there are several other indices used for global exposure, too. The two most popular alternatives are the FTSE All World Index and the S&P World Index, which offer similar diversification and have multiple associated ETFs for individual investors to invest in.
Some popular all world ETFs using these indices and others include:
- FTSE All World ex-US ETF (VEU)
- Total World Stock Index ETF (VT)
- S&P Global 100 Index (IOO)
- Vanguard FTSE All World ex-US Small Cap ETF (VSS)
- Vanguard Total International Stock ETF (VXUS)