Alternative ETFs in MSCI World: Now, Market Participants Can Opt for These Diverse Investment Opportunities
The MSCI World Struggles as Investors Seek Alternatives
In the midst of a market sell-off, the MSCI World is under pressure. Yet, investors are outdoing the market with these rivaling indexes, promising better performance in the future.
The MSCI World, although popular among ETF investors, frequently garners criticism. Experts often caution about concentrating risks, the lack of industrial and emerging markets, and other issues. These very inadequacies have proven detrimental for the MSCI World during the current market turmoil, leading to disproportionate losses compared to its alternatives.
Shining Stars: MSCI World Alternatives
While the ETF has slipped around 3.0% in value since the beginning of the year, these three index funds have managed to surpass the MSCI World and potentially continue this success:
SPDR MSCI ACWI IMI (Performance YTD: -2.5%)
The SPDR MSCI All Country World Investable Market UCITS ETF has displayed a slightly better performance than the MSCI World. This index fund invests in both industrial and emerging markets, along with small caps. The inclusion of these components could lead to outperformance in the future, as diversified risks are lower, and small caps and political risk premiums are accounted for.
Gerd Kommer Multifactor ETF (Performance YTD: 0.8%)
The L&G Gerd Kommer Multifactor Equity UCITS ETF has also outperformed the MSCI World. This impressive performance is largely due to the index fund's position and country weight caps, causing less investment in heavily fallen US stocks. Additionally, the ETF could continue to excel because of its focus on emerging markets and small caps, plus its multifactor approach.
Invesco FTSE 3000 RAFI ETF (Performance YTD: 2.1%)
The Invesco FTSE RAFI All World 3000 UCITS ETF has delivered the most considerable outperformance. The selection approach of the index fund involves buying companies from industrial and emerging markets based on factors such as revenue, cash flow, book value, and dividends. This method could lead to continued outperformance due to the factor premiums offering above-average returns in the long run.
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Sources: [1][2][3][4][5]
- Despite the MSCI World's struggle, the SPDR MSCI ACWI IMI, Gerd Kommer Multifactor ETF, and Invesco FTSE 3000 RAFI ETF have managed to surpass the MSCI World, especially in the current market turmoil.
- The MSCI World, often criticized for its lack of industrial and emerging markets, has suffered disproportionate losses compared to these alternatives, such as the SPDR MSCI ACWI IMI, Gerd Kommer Multifactor ETF, and Invesco FTSE 3000 RAFI ETF, which invest in these missing sectors.
- The SPDR MSCI All Country World Investable Market UCITS ETF and the L&G Gerd Kommer Multifactor Equity UCITS ETF have demonstrated better performance than the MSCI World in 2022, with the Invesco FTSE RAFI All World 3000 UCITS ETF delivering the most significant outperformance.
- The MSCI World ETF, despite its popularity among finance investors, has underperformed its alternatives due to its lack of diversification and overexposure to certain markets, while the SPDR MSCI ACWI IMI, Gerd Kommer Multifactor ETF, and Invesco FTSE 3000 RAFI ETF offer a more balanced approach to global investing, especially in the technology sector.
