MSCI – Indices for investors
MSCI offers many indices or indexes to investors worldwide. Within their portfolio of indices they manage large regional indices such as the MSCI World and MSCI Europe index but they also include specific regional indices such as the MSCI France or MSCI Sweden index.
Their main focus are equities but MSCI is also committed to the real estate and commodity market via IPD MSCI indices and their analysis tools for commodities.
A short history of MSCI
MSCI is short for Morgan Stanley Capital International and it offers indices for investors since 1969 (first under the name of Capital International). Morgan Stanley has let MSCI to travel on its own by an IPO in 2007 and today MSCI is acting as a single company headquartered in New York.
After the divestment of Morgan Stanley MSCI began acquiring likewise companies such as RiskMetrics, IPD, GMI Ratings, Insignis and Investor Force. MSCI has almost 3.000 employees working in offices in London, Mumbai and New York.
MSCI Modern Indices
As we said before MSCI offers many indices but their group of Modern Indices is by far the most popular part of their equity indices. It is made up of several large regional indices and within each regional index MSCI offers country-based indices. Here we will discuss the major MSCI indices:
The most popular MSCI index is without any doubt the MSCI World index that covers the equity performance of 23 developed countries. Almost 85% of the market capitalization of these countries is included in the MSCI World Index.
So one could say that the MSCI World index really gauges the performance of the world equity markets. It is obvious that the MSCI World index makes a perfect index to be tracked by ETF’s and iShares is doing just that. Vanguard also is tracking the MSCI World index closely through its Vanguard Total World Stock ETF.
MSCI USA index
With the MSCI USA Index you will have one of the best indices to track the performance of the total US equity market. It covers all major market sectors in the US and approximately 85% of the market capitalization in the US.
MSCI ACWI index
This index is by all means the best global index that includes all major developed countries and 24 emerging markets. So in short, it covers the largest part of the global equity market. More than 2.400 individual public companies are included with a weighting of 70% in large cap, 15% mid cap and 15% small cap.
MSCI Europe index
The MSCI Europe covers 15 equity markets in Europe. More than 400 European companies are included and within Europe weighting is based upon market capitalization. The UK, France and Germany are the obvious Top 3 here followed by Switzerland and The Netherlands.
Of course MSCI also offers separate indices for each country included. Again these indices offer great opportunities for ETF investors as you can invest through a specific ETF the exact market you are interested in.
MSCI Emerging Markets index
The MSCI Emerging Markets index is based upon equities originating from countries such as Brazil, Mexico, Poland, Hungary, Emirates, Pakistan, China and Taiwan to name a few. Again it is a very balanced index and perfectly suited to be tracked by an ETF. I am closely following the iShares MSCI Emerging Markets ETF as it often offers nice opportunities.
MSCI EAFE index
This is a specific index covering the markets in Europe, Australia, Asia and the Far East. It explicitly excluded equities from the USA or Canada and that makes it a special one to look for. You could say that by looking at the performance of the MSCI EAFE index you are looking at the markets without the impact of North America.
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