The people who brought you the MSCI All Country World indexes are now saying “never mind.”
Forty-five years after launching the global stock indexes now known as the MSCI ACWI, The Capital Group Cos. Inc. plans to revise the investment methodology for many of its equity strategies, putting more emphasis on where a company earns its revenue and less on where it is based.
The world has changed, and the days when a company got most or all of its income from its country of domicile are gone, said Rob Lovelace, Capital Group director and a member of the company's management committee.
“So the 'why now' is we think we're at a point where we have a different way of doing it. ... Companies are now reporting revenue on a geographic basis consistently enough, and enough of them do it,” he said.
Mr. Lovelace said the firm is considering switching benchmarks on about a dozen strategies from the ACWI to a new series of MSCI economic indexes that tracks company revenue on a geographical basis.
“We have been exploring the possibility of using economic exposure indexes with MSCI with one or more of our funds for some time, but nothing is imminent,” Mr. Lovelace said. “We still have a long way to go.”
Capital International, the international division of the Los Angeles money management firm, developed what was to become the All Country World index out of its Geneva office in 1968. Capital sold the index to Morgan Stanley in 1986, and by the late 1990s, it was becoming widely accepted by institutional investors.
Today, the 2,500-company stock index is the most widely used broad-based global equity benchmark. Morgan Stanley spun out its index business in 2007 into a separate public company, MSCI Inc.