Global Tracker Portfolio Weightings

Chris75
Chris75 Posts: 163 Forumite
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in Savings & investments
I am interested in the idea of global index tracker funds and started with the idea that one global tracker fund would be a total answer - but now I am not so sure.

I consider that the weightings used between markets for both the MCSI & FTSE world indexes are unhelpful - both have a strange weighting with excessive US exposure. I note that very few global tracker addicts seem to query exactly what it is that they are tracking.

I have been searching the internet and have found a company called Elm that has an interesting take on portfolio weightings. Whilst I do not intend to use their services (at the moment anyway) Their ideas seem sensible and they could be easily adapted to make the UK the home market rather than the US.

What do you think?

https://elmfunds.com/blog/our-asset-allocation-methodology/
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Comments

  • dunstonh
    dunstonh Posts: 116,309 Forumite
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    Their ideas seem sensible and they could be easily adapted to make the UK the home market rather than the US.

    No. it is important not to use US research when investing from the UK. US taxation is different to the UK. Asset models take into account taxation differences. Plus, the US is home biased compared to other markets. Not for any financial reason but for commercial reasons. Currency fluctuations come into play as well.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Chris75
    Chris75 Posts: 163 Forumite
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    edited 16 October 2016 at 9:49PM
    Is there any equivalent UK based research/ application on tracker fund weightings?

    I do not think that I like the US bias of MCSI & FTSE global (nor necessarily some of the other weightings) but if I mess with them without logic it somehow seems to contradict the idea of passive tracking.

    The Elm ideas do not seem that biased by tax & they do explain the domestic weightings so they could be changed for another home market.

    I am not sure what to say about the currency fluctuations as surely they would occur in a global fund wherever the holder was based.
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
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    Chris75 wrote: »
    I consider that the weightings used between markets for both the MCSI & FTSE world indexes are unhelpful - both have a strange weighting with excessive US exposure.

    US companies dominate the global indexes, something like 30 odd out of the top 40. FTSE only represents 6.7% of the "global" index. When the top 100 companies are combined and weighted.
  • ChopperST
    ChopperST Posts: 1,257 Forumite
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    Sorry for the hijack.

    Where is the most reliable information for individual countries market cap?
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    ChopperST wrote: »
    Sorry for the hijack.

    Where is the most reliable information for individual countries market cap?

    I bet you arent. How difficult is it to just post a new question. Why not do that?
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    Chris75 wrote: »
    I am interested in the idea of global index tracker funds and started with the idea that one global tracker fund would be a total answer - but now I am not so sure.

    I consider that the weightings used between markets for both the MCSI & FTSE world indexes are unhelpful - both have a strange weighting with excessive US exposure.

    If you disagree* then you can create your own with with just two funds, one global, and one global ex-US, in whatever proportion you deem corrects the "excessive" US holdings of the global, or one US only and one global ex US.


    * How did you arrive at your definition of "excessive"?
  • Linton
    Linton Posts: 17,125 Forumite
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    edited 17 October 2016 at 11:28AM
    Up to date and conveniently presented data on world capitalisation is difficult to fund. You could look here. It shows US at approx 40%,Asia at 33% and Europe at 19.5% (of which the UK is 4.7%). Unfortunately it doesnt state the date for which the data applies, however given the Asian% it would seem to be relatively recently.

    The MSCI World Index is for countries deemed to be "developed" which much of Asia including China and India isn't. The FTSE All world index isnt truly all world either as it only covers large and mid cap companies. Whether these omissions fully account for the differences between the % actual market capitalisations given in the economic data and the % allocations in the index funds I dont know.
  • ChopperST
    ChopperST Posts: 1,257 Forumite
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    Thanks as always for the informative reply Linton.

    @ anotherjoe my question is directly related to the OPs and the discussion on this thread so what's the point in clogging up the forum with another identical thread, there's so much duplication already?
  • _CC_
    _CC_ Posts: 362 Forumite
    Linton wrote: »
    Unfortunately it doesnt state the date for which the data applies, however given the Asian% it would seem to be relatively recently.

    "Our information in this data visualization comes from the World Federation of Exchanges monthly report from November 2015"
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    edited 17 October 2016 at 5:57PM
    ChopperST wrote: »
    Thanks as always for the informative reply Linton.

    @ anotherjoe my question is directly related to the OPs and the discussion on this thread so what's the point in clogging up the forum with another identical thread, there's so much duplication already?

    because you then end up with dozens of "related" questions many of which will be peripheral and actually not be related.

    Plus, were it to be a seperate question maybe the world expert on stock allocations might see your title , whereas they might ignore a thread about what weightings to have. Or even if they see the thread they may just answer the OPs question and not bother reading all the way through each response to see if there are other questions they could answer.

    Finally, its rude to the OP, if he's subscribed to this thread he starts getting emails saying he has a reply and each time its answering your question, not his. Like this one for example :D
This discussion has been closed.
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