What Is the MSCI ACWI? A Beginner's Guide to the Global Equity Index

If you’ve ever wondered how investors track the performance of global stock markets, the MSCI ACWI (All Country World Index) is a name you’ll likely come across. This powerhouse index, managed by MSCI Inc., is like a snapshot of the world’s biggest and mid-sized companies across developed and emerging markets. Covering about 85% of the global investable equity market, it’s a go-to benchmark for anyone looking to diversify their portfolio worldwide. In this blog, we’ll break down what the MSCI ACWI is, how it’s built, calculated, and kept up to date, so you can understand why it’s such a big deal in the investment world.

What Makes Up the MSCI ACWI?

The MSCI ACWI is a global equity index that tracks large-cap and mid-cap stocks from 23 Developed Markets (think USA, Japan, UK) and 24 Emerging Markets (like China, India, Brazil). Together, these markets represent roughly 85% of the world’s investable equity, measured by free float-adjusted market capitalization (more on that later). Here’s a quick look at its makeup:

• Geographic Reach: Spans 47 countries, from established economies to fast-growing ones, giving investors a broad view of global opportunities.

• Company Size: Focuses on large-cap (top 70% of each market) and mid-cap (next 15%) companies, leaving out smaller firms that appear in other MSCI indexes like the All Cap Indexes.

• Sectors: Covers all major industries, from tech to healthcare, using the Global Industry Classification Standard (GICS®), which sorts companies into 11 sectors, 24 industry groups, and more.

• Constituents: Includes around 2,900 stocks, offering a diverse mix of global giants and regional leaders.

Unlike some indexes, the ACWI skips Frontier Markets (less developed economies) and Standalone Markets, focusing on highly investable and liquid markets. It’s a perfect tool for investors wanting global exposure without diving into the smallest or riskiest corners of the market.

How Is the MSCI ACWI Formed?

Creating the MSCI ACWI is no small feat. MSCI follows a rigorous process, outlined in their Global Investable Market Indexes Methodology (February 2025), to ensure the index is both comprehensive and investable. Here’s how it comes together:

Step 1: Defining the Equity Universe

MSCI starts with a massive pool of stocks from Developed and Emerging Markets. Eligible securities include:

• Common shares, Real Estate Investment Trusts (REITs), and certain preferred shares.

• Exclusions: Mutual funds, ETFs, derivatives, and most investment trusts.

Each stock is assigned to one country (e.g., USA or India) for clear organization, with Europe’s Developed Markets treated as a single unit during construction.

Step 2: Filtering for Investability

Not every stock makes the cut. MSCI applies strict filters to ensure only investable and liquid stocks are included:

• Size: Companies need a full market capitalization of at least USD 443 million (as of February 2025) to qualify, ensuring they’re substantial enough for global investors.

• Free Float: At least 50% of the size requirement must be free float-adjusted (shares available to public investors, not insiders or governments).

• Liquidity: Stocks must have a 12-month and 3-month Annual Traded Value Ratio (ATVR) of 20% (Developed Markets) or 15% (Emerging Markets), plus a trading frequency of 90% or 80% over four quarters. Stocks priced above USD 10,000 or suspended for long periods (e.g., 50+ days in China) are out.

• Foreign Access: A Foreign Inclusion Factor (FIF) of 0.15 or higher ensures international investors can buy in, with exceptions for critical large firms.

• Trading History: New IPOs need three months of trading history, unless they’re massive.

• Foreign Ownership: Stocks with restrictive foreign ownership limits must have at least 15% room for foreign buyers.

• U.S. Reporting: U.S. companies must file SEC Forms 10-K or 10-Q for transparency.

These filters create a Market Investable Equity Universe that’s practical for global portfolios.

Step 3: Segmenting by Size

The investable universe is divided into Large Cap, Mid Cap, and Small Cap segments, but the ACWI only includes the Standard Index (Large + Mid Cap), covering 85% of each market’s free float-adjusted market cap. MSCI sets global size cutoffs to keep things consistent across countries, using buffer zones to minimize unnecessary changes. For example, a company’s full market cap determines its segment, with extra checks for free float and foreign access.

Step 4: Building the ACWI

The ACWI is a composite index, combining the Standard Indexes of all 47 DM and EM countries. Think of it as a puzzle where each country’s large and mid-cap index is a piece, fitted together to form a global picture. Regional indexes, like MSCI World (DM only) or MSCI Emerging Markets, are also derived from this process.

How Is the MSCI ACWI Calculated?

The ACWI’s value is calculated daily using free float-adjusted market capitalization, which reflects only the shares investors can actually buy. Here’s how it works:

• Weighting: Each stock’s weight in the index is its free float-adjusted market cap divided by the total free float-adjusted market cap of all constituents. The formula looks like:

Weight = (Price × Number of Shares × FIF) ÷ Total Index Market Cap

• The FIF adjusts for shares unavailable due to insider ownership or foreign restrictions.

• Adjustments: MSCI tweaks weights for low liquidity or foreign access issues and updates for corporate events like dividends or stock splits.

• Currencies: The index is available in multiple currencies (e.g., USD, EUR), with daily exchange rate conversions.

• Sectors: Stocks are grouped by GICS for sector-level insights, from tech giants to energy firms.

• Daily Updates: Using prices from eligible exchanges, MSCI recalculates the index daily to reflect market movements.

This method ensures the ACWI is transparent, replicable, and aligned with what investors can actually trade.

How Is the MSCI ACWI Maintained?

Markets never sleep, and neither does MSCI’s maintenance team. The ACWI stays relevant through regular updates, as outlined in the methodology’s Section 3:

• Quarterly Index Reviews: Every February, May, August, and November, MSCI refreshes the index by:

  • Updating the equity universe with new listings or delistings.

  • Reapplying size, liquidity, and investability filters.

  • Adjusting size cutoffs and reassigning companies to Large or Mid Cap segments, using buffer zones to limit turnover.

  • Updating FIFs and share counts based on new data.

• Ongoing Event-Related Changes: Corporate actions like mergers, acquisitions, IPOs, or bankruptcies trigger immediate updates. For example:

  • A big IPO might get added early if it meets size and liquidity criteria.

  • A bankrupt company gets removed.

  • Share offerings or buybacks adjust a stock’s weight.

• Announcements: MSCI communicates changes to clients and the public, ensuring transparency for events like IPO inclusions or sector reclassifications.

These updates keep the ACWI stable yet responsive, balancing consistency with market evolution.

Why Does the MSCI ACWI Matter?

The MSCI ACWI is more than just numbers—it’s a tool that powers global investing. Here’s why it’s a big deal:

• Diversification: With 2,559 stocks across 47 countries, it spreads risk across markets and sectors.

• Benchmarking: Fund managers use it to measure their performance against a global standard.

• ETFs and Funds: Many exchange-traded funds (ETFs), like the iShares MSCI ACWI ETF, track the index, making it easy for retail investors to go global.

• Insights: It offers a window into global economic trends, from U.S. tech dominance to China’s growth.

Whether you’re a seasoned investor or just starting, the ACWI is a key piece of the global market puzzle.