Investment manager Invesco has launched “the first ETF in Europe that tracks the MSCI World Equal Weight Index”, providing an alternative to traditional global equity investments by reducing the concentration risk inherent in standard market-cap-weighted indices.
This development comes as broad-based global equity ETFs continue to attract significant investor interest, with over $35 billion of net new assets added in 2024. According to the investment manager, this trend places global equity ETFs as the second-highest category for ETF inflows, surpassed only by US equity exposures.
Concentration risk has become a concern for many investors, as the top 10 holdings in the MSCI World Index now account for 25% of the index, marking the highest concentration level in more than 40 years. With this equal weight strategy, the ETF offers a more diversified exposure to global equities, appealing to investors seeking to minimise volatility.
This new launch comes on the back of rising interest in equal weight strategies, particularly in the US market. Equal weight ETFs focusing on US stocks have already attracted over US$5 billion in net inflows since the beginning of 2023. Invesco’s new ETF extends this investment opportunity to global equities, enabling investors to access a broader, less concentrated market through a single investment vehicle.
New ETFs in H1 2024 driven by bitcoin and dividend focus
The MSCI World Equal Weight Index, which underpins this new ETF, includes over 1,400 stocks from large and mid-cap companies across 23 developed markets. Unlike the traditional MSCI World Index, which weights companies by their market capitalisation, this equal-weight index assigns the same weight to each constituent at every quarterly rebalance. Invesco plans to track the index using a sampling strategy based on quantitative factors such as country and sector weights, ensuring a diverse and balanced portfolio.
With its 0.20% annual charge and an accumulation structure. this fund adds to Invesco’s existing suite of equal weight products, which includes the S&P 500 Equal Weight and Nasdaq-100 Equal Weight Ucits ETFs.
Gary Buxton, head of Emea and Apac ETFs and indexed strategies at Invesco, said: “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.”
Chris Mellor, head of Emea equity ETF product management at Invesco, added: “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% to the US compared to over 70% in the standard index, and that allows you to capture increased exposure to Japan, the UK and other developed markets.”
