As the world economy changes, so should the indices that track them, argues Capital Group. At this week’s Schwab Impact conference, Capital Group’s Rob Lovelace, grandson of the firm’s founder, will present a new global index based not on where a company is domiciled but where they earn their revenue. There are better data to make the reports more accurate — for example, to track a company that benefits from fast growth in emerging countries but is not based there.
Capital Groups created the MSCI All Country World Index (ACWI) 45 years ago. The firm was eventually sold to Morgan Stanley and is now an independent entity. The index, which tracks 2,500 stocks, is the most widely used, broad-based global equity benchmark. While use of the ACWI is expected to continue, the new index heralded by Capital Group could significantly change the results of many international stocks since it has the potential to more accurately reflect performance of a stock against its true peer group.