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[Home office investment teams at wealth management firms are under increasing pressure to deliver personalized client portfolios that include meaningful international exposure. Yet achieving this has often proven difficult: managing direct holdings across multiple local markets introduces operational complexity, currency management issues, and cost inefficiencies. These hurdles have made it challenging for firms to scale custom strategies, particularly in direct indexing and separately managed accounts (SMAs), while meeting client demand for global diversification.
Pressure for a solution has been building as direct indexing experiences rapid growth with wealth managers looking to deliver tailored portfolios at scale. Clients are increasingly asking for personalization, and firms are looking for ways to extend this approach beyond U.S. equities into international allocations.
To explore the implications and solutions to this structural investment challenge, we spoke with Christine Berg, Managing Director, Head of Americas Index at MSCI, who has recently introduced the ACWI ADR Indexes. By leveraging U.S.-listed American Depositary Receipts (ADRs), the offering mirrors the familiar MSCI ACWI Index used by many institutional investors and asset managers, while adapting it for SMAs and direct indexing portfolios. The launch comes at a timely moment, with geographic diversification more relevant than ever amid global market shifts, and with firms needing practical tools to integrate international equities into client-focused strategies.]
Hortz: What is the main challenge home office investment teams face when building portfolios with international exposure?
Hortz: Constructing allocations across multiple local markets involves different trading rules, currencies, and regulatory standards. For teams designing SMAs or direct indexing strategies, that complexity can be an obstacle to personalization at scale. The ADR Indexes were created to remove those barriers, offering a straightforward way to trade in U.S. dollars through U.S. exchanges to achieve international diversification.
Hortz: How do these indexes compare to the traditional MSCI ACWI, and what types of ADRs are included?
Berg: The ACWI ADR Index is designed to look and feel like the MSCI ACWI Index – the same trusted benchmark used by institutional investors and asset managers – but expressed entirely through ADRs. This makes it a natural fit for wealth managers building SMAs or direct indexing portfolios.
The indexes include Level I, II, and III ADRs, all subject to liquidity screening. A key milestone was the inclusion of Level I ADRs starting in 2022, which substantially expanded coverage. Today, the ACWI ADR Index captures about 90% of the global investable universe, but in a format wealth managers can easily implement.
Hortz: From a wealth management perspective, what are the main benefits of the MSCI ACWI ADR Indexes?
Berg: There are three primary benefits.
First, exposure: firms can deliver true global diversification through U.S.-listed securities, which simplifies portfolio implementation and oversight.
Second, personalization: the indexes can serve as modular building blocks, enabling direct indexing strategies tailored to specific client objectives.
Third, efficiency: by mapping the ADR universe and applying investability and liquidity criteria, the framework reduces operational complexity and supports scalability.
Together, these benefits make it easier for wealth managers to bring institutional-quality global solutions to their clients.
Hortz: How do you ensure the indexes remain aligned with the parent MSCI indexes in terms of exposures?
Berg: We maintain strict alignment with the parent ACWI and related indexes. Index reviews are conducted quarterly, in line with MSCI’s Global Investable Market Indexes.
Additionally, constituent weights are calibrated so regional exposures remain within ±5% of the parent index. This ensures that ADR-based portfolios reflect equivalent global exposures and risk-return characteristics that institutions have long trusted.
Hortz: Beyond broad-market representation, can the ADR indexes be customized for wealth management use cases?
Berg: Yes. While the standard indexes provide a global foundation, they can also be customized to integrate client preferences, specific factor and thematic tilts, and even sustainability and climate objectives.
This flexibility makes them especially relevant for firms pursuing direct indexing, where personalization is a differentiator. By using this customizable ACWI ADR Index framework, wealth managers can deliver portfolios that reflect both global diversification and individual client values.
Hortz: What kind of performance and risk characteristics do these indexes provide compared with their parent benchmarks?
Berg: The ADR-based indexes are designed to closely track their parent benchmarks, so the risk and return characteristics remain aligned. Because of the liquidity and investability screens, sector and country exposures stay consistent. This allows wealth managers to have confidence that their client portfolios reflect the same underlying global market dynamics as the MSCI ACWI Index – just accessed through U.S.-traded instruments.
Hortz: Any other thoughts for wealth management firms exploring this offering?
Berg: We believe the timing could not be better. Wealth clients are increasingly demanding personalization, and direct indexing has emerged as one of the fastest-growing solutions in the industry. Until now, much of that innovation has been centered on U.S. equities. With the ACWI ADR Indexes, wealth managers can extend direct indexing into global markets – using the same modular, standards-based framework that institutional investors have trusted for decades.
At a time when geographic diversification is front of mind for many clients, these indexes provide a straightforward way to deliver it through U.S.-listed securities. We see this as a timely and scalable solution for firms that want to expand global access, personalize client portfolios, and bring direct indexing into its next stage of growth.
We welcome and encourage readers to visit us at https://www.msci.com/indexes/direct-indexing to explore the full offering.
This article was originally published here and is republished on Wealthtender with permission.
About the Author
Bill Hortz
Founder Institute for Innovation Development
To make Wealthtender free for readers, we earn money from advertisers, including financial professionals and firms that pay to be featured. This creates a conflict of interest when we favor their promotion over others. Read our editorial policy and terms of service to learn more. Wealthtender is not a client of these financial services providers.
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