NEW YORK (MarketWatch) — Most indexed investors have at least one broad-based fund in their portfolios, but relatively few choose the broadest of all — a fund based on a global index.
Fiddling with allocations to a U.S. fund, an ex-U.S. developed markets fund and an emerging markets fund is fine if there is a purpose to it. If not, you might consider an exchange-traded fund based on a global index, which wraps the world’s equity-market pieces into a single package.
ETF Database lists 154 global ETFs, but most of them focus on sectors and even thinner slices, such as “junior gold miners” and “cloud computing.” In this article, we will look at four broad-perspective global funds that could be suitable for worldwide equity exposure. The funds are:
|Name||Symbol||No. of Stocks||Net Assets|
|iShares MSCI ACWI Index Fund||ACWI||1,201||$2.7 billion|
|Vanguard Total World Stock ETF||VT||3,750||$1.2 billion|
|iShares S&P Global 100 Index Fund||IOO||102||$1 billion|
|SPDR Global Dow ETF||DGT||155||$96.6 million|
Two are benchmark-style, with lots of stocks, and two are selective “blue-chip” style. Diversification is not really an issue with any of them, although in that department thousands of stocks would seem to have an edge over 100 or so. On the other hand, concentrated portfolios sometimes can outperform because each component has a heftier weight.
And sometimes not. Since I just used the “P” word, let’s get right to the performance stats. The data below are as of March 31 and are computed using closing market prices of the ETFs.
|Name||Q1 2012||1 Year||2 Years||3 Years||5 Years|
|iShares MSCI ACWI||11.93%||-2.40%||4.15%||18.55%||N/A|
|Vanguard Total World||11.79%||-3.19%||4.13%||18.58%||N/A|
|iShares S&P Global 100||9.75%||-2.69%||2.27%||14.60%||-3.00%|
|SPDR Global Dow||11.26%||-8.54%||-0.99%||10.44%||-5.63%|
A couple of notes about the SPDR Global Dow DGT +0.54% are in order. First, this ETF was, until May 2, 2011, known as the SPDR DJ Global Titans ETF and benchmarked to the Dow Jones Global Titans Index. So, the track record beyond one year really belongs to a different beast. Second, the Global Dow is equally weighted (rebalanced every September), while the other three are weighted by market capitalization.
The equal weighting explains why the Global Dow sank the most in the year ended March 31, a period in which emerging markets were down about 12%. But the ETF was back in the game in the first quarter of this year when emerging markets rebounded by around 14%. And that explains why the S&P Global 100 ETF lagged the pack in the first period — it has no components from emerging markets. Here is how the four stack up in terms of composition:
|Number Countries||U.S. Weight||Emerg. Mkt Wt.||Top 10 Weight*|
|iShares MSCI ACWI||48||45.35%||9.72%||9.09%|
|Vanguard Total World||45||41.90%||14.00%||7.70%|
|iShares S&P Global 100||12||50.55%||0.00%||29.32%|
|SPDR Global Dow||15||44.23%||8.45%||8.84%|