Funds / ETFs, Stocks

ETF Asset Allocation Model For Active Investors: $ACWI Transition Into $SPY, $VGK, $EEM, $EPP, $EWJ & $EWC


By ETFalpha

Investors who want to gain exposure to the global stock market can simply buy the iShares MSCI ACWI ETF (Nasdaq: $ACWI). The fund seeks to track the investment results of an index composed of large and mid-capitalization developed and emerging market equities and offers the following features:

1. Exposure to a broad range of international developed and emerging market companies;

2. Access to the global stock market in a single fund;

3. Use to diversify internationally and seek long-term growth in your portfolio.

In reference to the geographic exposure, the ETF had the following country split as of 31 December 2015:

ACWI Country Split

iShares MSCI ACWI ETF geographic exposure. Source: iShares website.

In order to simplify the above country breakdown, let’s aggregate some of the positions in order to end up with only six geographic categories.

1. United States: 52%

2. Europe: 17%

3. Emerging Markets: 15%

4. Asia Pacific ex. Japan: 5%

5. Japan: 8%

6. Canada: 3%

The above aggregates correspond to the following ETF’s and index/benchmark model allocations.

1. $SPY: 52%

2. $VGK: 17%

3. $EEM: 15%

4. $EPP: 5%

5. $EWJ: 8%

6. $EWC: 3%

The above transition from the single $ACWI ETF covering the global stock market to the six geographic specific ETF’s ($SPY, $VGK, $EEM, $EPP, $EWJ and $EWC) offers investors opportunity to under- or overweight (in other words deviate) particular geographic jurisdictions. That way you can try to deliver alpha (extra value) by beating the MSCI AC World Index. One of the more interesting quantitative investment approaches is a trend following model which takes into account trend directions and momentum expressed via different technical measures. We are not going to disclose them in this article as there are many of them available and the ones which we follow are our proprietary knowledge.

As of end of the 30th March 2016 our trend-following asset allocation model generated the following results:

Asset Allocation

It’s worth mentioning that we run our asset allocation models on both absolute and relative basis. Our relative models scrutinize ratios in terms of trend directions so they look at a particular ETF vs. the underlying benchmark.

We value your feedback. Please feel free to leave your observations below within the comments section or via our Twitter account: @ETFalpha.

Important Information Related to this Article

Please familiarize yourself with our DISCLAIMERS every time you engage the site: they’re updated constantly without notice. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product. ETFalpha did not own any shares of the mentioned ETFs at the moment of writing this article.


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