MSCI World ETF Sees Shift in US Holdings as Major Index Overhaul Looms

For the first time in several years, the iShares MSCI World ETF has recorded a net reduction in its US stock allocation. This shift occurred during the quarterly index rebalancing executed in early March. While this may signal a potential change in direction, it is merely a precursor to a far more substantial portfolio transformation scheduled for May.

Macroeconomic Events Take Immediate Focus

Before the impending index methodology change, a key macroeconomic event is poised to influence the ETF’s short-term trajectory. The US Federal Reserve’s policy meeting on March 17-18 will be closely watched. The central bank’s decision on whether to maintain its path toward potential interest rate cuts or pause in light of recent oil price shocks is expected to be a primary driver for the fund’s near-term performance, given its significant US exposure. The ETF concluded the previous week at $182.24, trading approximately five percent below its all-time high of $192.37.

Details of the March Rebalancing

The adjustments enacted on March 2 resulted in 18 new additions and 27 removals from the index. Within the US segment specifically, 15 stocks were deleted against eight inclusions. Notable new entrants include AST SpaceMobile, Coherent Corp, and FTAI Aviation—firms linked to AI hardware and satellite communication technology.

Changes were also made in other regions. Japanese companies Ibiden and Shimizu entered the portfolio, while Tokyo Metro and Trend Micro were excluded. In Europe, the removal of French payment service provider Edenred was a key change.

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Despite these adjustments, the fund maintains a heavy concentration in US equities, with American stocks still accounting for over 70% of the total fund assets. The top holdings by weight remain Nvidia (5.40%), Apple (4.61%), and Microsoft (3.44%).

Trading activity around the rebalancing date was significantly elevated, with roughly 486,000 fund shares changing hands compared to a daily average of nearly 280,000—a typical pattern during such index reconstitutions.

The Pivotal Change Arrives in May

The March rebalancing was intentionally designed with restraint. MSCI aimed to avoid triggering major market turbulence ahead of a fundamental revision to its index methodology set to take effect in May. New rules concerning free-float calculation and adjusted rounding logic are anticipated to noticeably alter the weighting of mega-cap stocks and prompt considerably more portfolio turnover than the current adjustment.

In a related development, MSCI has abandoned a controversial proposed rule change. Companies holding cryptocurrency assets exceeding 50% of their total assets will remain eligible for index inclusion, provided they meet all other standard criteria.