Invesco writes that it is launching the first ETF in Europe that will track the MSCI World Equal Weight Index.
Broad-based global equity ETFs have gathered more than USD35 billion of net new assets in 2024, making this category second only to US equity exposures for ETF flows year-to-date, the firm says, adding, ‘the Invesco MSCI World Equal Weight UCITS ETF offers investors an alternative approach to global equity exposure that reduces concentration risk typically associated with a standard market-cap-weighted methodology’.
Invesco writes that its new ETF could be particularly compelling for investors who are concerned about potential volatility in global markets, given the combined weight of the top 10 holdings in the MSCI World Index is currently 25 per cent of that index, the highest concentration in over 40 years. “US-focused equal weight ETFs have already attracted investor attention with more than USD5 billion of net inflows since the start of 2023, and this new launch gives investors the option to take a less concentrated exposure to the broader global equity market in one easy place”.
Gary Buxton, Head of EMEA and APAC ETFs and Indexed Strategies at Invesco, says: “The sharp equity market sell-off in July – while relatively short-lived – provided a timely reminder of just how quickly individual company fortunes and investor sentiment can change. Our new ETF offers investors a sensible way to maintain broad exposure to global equity markets, but with reduced sensitivity to the performance of any individual company.”
The MSCI World Equal Weight Index is constructed from the parent MSCI World Index by including the same constituent securities but equally weighting each company at each quarterly rebalance date rather than weighting securities by their float-adjusted market capitalisation.
The index comprises more than 1,400 stocks of large and mid-capitalisation companies across 23 developed markets. The Investment Manager will track the index by applying a sampling strategy, which includes the use of quantitative analysis to select securities from the index using factors such as country and industry sector weights and liquidity.
Chris Mellor, Head of EMEA Equity ETF Product Management at Invesco, says: “Most investors instinctively think of an equal-weight approach as being a way to spread risk at the stock level. While that observation is completely valid, an ETF tracking the MSCI World Equal Weight Index is also more balanced from a sector and geographic perspective. For instance, you end up with an allocation of around 42 per cent to the US compared to over 70 per cent in the standard index, and that allows you to capture increased exposure to Japan, the UK and other developed markets.”
