MSCI has teamed up with ETF issuer and disruptive technology specialist ARK Invest to launch five new global equity indices aligned with themes that are expected to have a significant impact on society and the economy in the future.
Stephane Mattatia, Head of Thematic Indexes at MSCI.
The new offerings include indices targeting the themes of autonomous technologies, genomics, fintech, and next-generation internet, as well as a broad innovation index that captures companies from across all four themes.
The launches complement MSCI’s existing ‘megatrend’ suite which consists of indices focused on the themes of cyber-security, robotics, ageing societies, efficient energy, smart cities, digital economy, future mobility, disruptive technology, and millennials.
Each index is based on the MSCI ACWI universe which provides broad global equity coverage across 23 developed and 26 emerging market countries. The methodology screens the parent universe to identify companies aligned with the relevant theme.
The new indices harness insights from ARK Invest to derive an “economic relevance score” for each firm to assess the strength of the company’s link to the theme. The score is based on the percentage of revenue derived from eligible business segments as well as the cumulative frequency of keywords in public descriptions of the company’s business activities. Firms with economic relevance scores of at least 25% will be selected to form the index.
Constituents are weighted according to the product of their economic relevance score and their float-adjusted market capitalization with issuer weights capped at 5%. Index reconstitution and rebalancing occur semi-annually, while the words used to determine index eligibility are reviewed annually.
Stephane Mattatia, Head of Thematic Indexes at MSCI, commented, “Technological advances, health crises, scientific discoveries, and changes in business and consumer behaviour continue to transform global dynamics. Investors are increasingly demanding innovative tools that enable them to better identify growth from these economic and societal transformations. Thematic investing continues to be an area of growth and focus for our clients, and we are therefore pleased to announce the launch of these new indexes as well as our collaboration with ARK Invest.”
Catherine Wood, CEO and CIO at ARK Invest, added, “ARK is delighted that MSCI’s innovation-specific thematic indexes will offer institutional investors exposure to the five innovation platforms evolving today. We believe artificial intelligence, robotics, energy storage, DNA sequencing, and blockchain technology are game-changing innovations that will transform the way the world works during the next five to ten years.”
The indices
The MSCI ACWI IMI Autonomous Technology & Industrial Innovation Index tracks companies that derive significant revenues from industrial automation, manufacturing, transportation, energy usage, energy storage, energy production, artificial intelligence, and machine learning.
The MSCI ACWI IMI Genomic Innovation Index tracks companies that derive significant revenues from genomic sequencing, synthesis, analysis or instrumentation, bio computing, bioinformatics, molecular diagnostics, and agricultural biotechnology.
The MSCI ACWI IMI Next Generation Internet Innovation Index tracks companies that derive significant revenues from the migration of technology infrastructure to the cloud, the increased use of shared technology, infrastructure and services, as well as the increased adoption of internet-based products and services, new payment methods, big data, the internet of things, and social media.
The MSCI ACWI IMI Fintech Innovation Index tracks companies that derive significant revenues from technological innovation in the financial sector.
The MSCI ACWI IMI Innovation Index is constructed by equally weighting “high exposure” versions of the above four indices. Each high exposure index consists of the top half of the securities from its respective thematic index when ranked by economic relevance score.