Invesco is launching the first exchange-traded fund (ETF) in Europe that will track the MSCI World Equal Weight Index.

The Invesco MSCI World Equal Weight UCITS ETF will offer investors an alternative approach to global equity exposure that aims to reduce concentration risk that is often associated with standard market-cap weighted methodology.

Broad-based global equity ETFs have gathered more than $35bn of net new assets in 2024, according to Invesco, making the category second only to US equity exposure for ETF flows in the year to date.

Invesco said that its new ETF could be “particularly compelling” for investors who are concerned about the potential volatility in global markets, as the combined weight of the top 10 holdings in the MSCI World Index is currently 25 per cent of that index, the highest concentration in more than 40 years.

The MSCI World Equal Weight Index is constructed from the parent MSCI World Index by including the same constituent securities, but equally weighting each company at each quarterly rebalance date, rather than weighting securities by their float-adjusted market capitalisation.

It comprises more than 1,400 stocks of large and mid-capitalisation companies across 23 developed markets.

The investment manager will track the index through the application of a sampling strategy, which includes the use of quantitative analysis to select securities from the index using factors such as country and industry sector weights and liquidity.

“The sharp equity market sell-off in July – while relatively short-lived – provided a timely reminder of just how quickly individual company fortunes and investor sentiment can change,” said Invesco head of EMEA and APAC ETFs and index strategies, Gary Buxton.

“Our new ETF offers investors a sensible way to maintain broad exposure to global equity markets, but with reduced sensitivity to the performance of any individual company.”

Invesco head of EMEA equity ETF product management, Chris Mellor, added: “Most investors instinctively think of an equal-weight approach as being a way to spread risk at the stock level.

“While that observation is completely valid, an ETF tracking the MSCI World Equal Weight Index is also more balanced from a sector and geographic perspective.

“For instance, you end up with an allocation of around 42 per cent to the US compared to over 70 per cent in the standard index, and that allows you to capture increased exposure to Japan, the UK and other developed markets.”

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