BIt is one of the most popular indices for ETF investors who want to invest all over the world and across all sectors with just one investment: the MSCI All Country World. The index includes 2,900 of the largest publicly traded companies from 47 countries. Unlike the MSCI World, it not only includes stocks from the industrialized nations, but also emerging markets such as China, India and South Korea. This reduces the overweighting of American equities somewhat, as they only account for 60 percent instead of 68 percent in the MSCI World. China, for example, has a weight of 2.5 percent.
In 2022, even the very broad investment did not survive without losses. With a minus of a good 13 percent, investors did better than with many investments in smaller markets. Pascal Kielkopf, capital market analyst at HQ Trust, has now calculated exactly how the individual sectors and regions have influenced the overall performance of the index. Above all, the collapse of the large Internet companies from Silicon Valley, which have become heavyweights in many stock indices after their long climb, also pulled the ACWI down.
IT values account for half of the price losses
“Unsurprisingly, the technology stocks, which were still highly weighted at almost 24 percent in the index at the beginning of 2022, contributed the most to the ACWI losses,” comments Kielkopf. “They alone made up almost half of the index minus.” The communications industry, which includes Google’s parent company Alphabet, also made a significant contribution to the overall loss with a minus of 2.7 percentage points.
Several providers have put ETFs on the index, the two largest ACWI index funds in Germany are the products of Blackrock iShares (WKN: A1JMDF) and State Street SPDR (A1JJTC). The sharp declines have also shifted weights in the index. According to the latest fact sheets from iShares and SPDR, the IT industry currently only has a weight of 20 percent. The Facebook parent company Meta is no longer one of the ten largest individual stocks in the ETFs, and the shares of Amazon and Tesla, for example, have also decreased significantly.
“The only industry that was significantly fighting against the losses was the energy stocks in 2022,” writes Kielkopf. Despite only having a 3.5 percent weight in the ACWI at the beginning of 2022, they managed to reduce its annual loss by 1.5 percent. Due to the strong price gains, energy stocks now make up 5.5 percent of the index. Exxon Mobil, a large oil company, is among the ten largest individual positions in the index funds.
America’s weakness weighs on world stock index
The very high weighting of American stocks in the ACWI is also reflected in the breakdown by region. “After a long period of outperformance, stocks from North America suffered the most in 2022,” says Kielkopf. “Due to their high weight, they were also the biggest loss-maker for the MSCI ACWI, with the strong US dollar reducing the North American losses within the MSCI ACWI by at least 3.2 percentage points.” European shares and securities from the emerging markets each contributed around 1. 5 percentage points to the losses. This reflects the significantly lower weighting of these regions. The Stoxx Europe 600 lost 13 percent last year and the MSCI Emerging Markets index even ended the year with a loss of 22 percent.
The direct return comparison of the All Country World Index with the MSCI World, which is only geared towards industrialized nations, also shows how small the contribution of the emerging countries to the overall development is. Despite the different setup, both ended 2022 almost identically with a loss of around 13 percent. Over five years, the MSCI World is up 52 percent, ahead of the ACWI at 46 percent.
