Unlike some other global ETFs, sustainability does not play a central role in this fund. (Photo: freepik, pixelshunter)
The market for world ETFs is highly competitive, but the Scalable MSCI AC World Xtrackers ETF, launched on December 11, 2024, offers some interesting innovations. In collaboration with DWS and MSCI, the fund aims to offer investors a cost-effective and globally diversified investment opportunity. But is it really a new must-have for portfolios – or are there stumbling blocks?
Global diversification meets hybrid replication
The Scalable MSCI AC World Xtrackers ETF (ISIN: LU2903252349) tracks the MSCI All Country World Index (ACWI). With an investment universe of large and medium-sized companies from 23 industrialized and 24 emerging countries, it covers around 85 percent of the global market capitalization. The new thing about the ETF is the hybrid replication method. While traditional ETFs replicate either only physically or only synthetically, this product combines both methods depending on your needs. European stocks are bought physically, while markets such as the USA or China are represented synthetically via swaps.
The advantages of this approach are obvious. Physical replication provides transparency and minimizes counterparty risks, while the synthetic component provides access to less liquid markets and avoids potentially higher tracking differences. According to the simulation, the ETF would have outperformed comparable products by 0.22 percent over the past 12 months – a plus point for performance-oriented investors.
However, one point of criticism remains. Synthetic replication in particular carries risks. Swaps are complex financial instruments whose functionality and risks may not be completely clear to many private investors. In volatile markets, there may be liquidity problems or unexpected deviations that can weigh on confidence in the ETF.
Fees: Almost too good to be true?
A clear advantage of the Scalable MSCI AC World ETF is its extremely low cost structure. In the first year, the total expense ratio (TER) is a sensational 0 percent, after which it rises to a slim 0.17 percent per year. This means that the ETF undercuts many established competitors such as the MSCI World ETF from iShares or Xtrackers.
Also waived Scalable on fees for savings plans that start at just one euro per month – a convincing argument for small investors. But caution is advised: the exemption from fees in the first year could be a marketing tool to attract investors. In the long term, it remains to be seen whether the TER will remain stable or potentially increase later as the ETF gains popularity.
Sustainability: No ESG focus
Unlike some other global ETFs, sustainability does not play a central role in this fund. Neither is there an explicit one ESG alignment controversial sectors are still excluded. For investors who want to invest ethically and ecologically, this should be a clear negative point.
On the other hand, due to the lack of an ESG focus, the ETF avoids restrictions that could impair diversification. This makes it attractive for traditional investors who want to invest in the overall market without compromising on sector or country weighting.
Conclusion: Cost-effective, innovative – but not without weaknesses
The Scalable MSCI AC World Xtrackers UCITS ETF offers investors a compelling combination of broad diversification, innovative replication methodology and low costs. With an entry price of 0 percent TER in the first year and a transparent savings plan model, it particularly appeals to cost-conscious small investors.
But the ETF also has weaknesses: its dependence on swaps poses potential risks and the lack of ESG orientation could be an exclusion criterion for sustainably oriented investors. It also remains to be seen how stable the low costs will be in the long term. For investors looking for a globally diversified and cost-efficient product, the Scalable MSCI AC World ETF is an interesting option – but with the clear requirement to keep a close eye on developments. An ETF with a lot of potential but no guarantees.
Disclaimer:
Not investment advice. No call to buy or sell securities.