TL;DR: Gauging community interest on adding mACWI (All Country World Index Fund) and/or mSPG1200 (S&P 1200). These mirrored assets would track well-established global/international indexes similar to the existing mSPY, which is U.S. only.
- ~3,000 large and mid-cap securities, ~50 countries, ~85% of the world’s assets.
- Index description: MSCI ACWI Index - MSCI
- iShares ETF: https://www.google.com/finance/quote/ACWI:NASDAQ
- 1200 securities, ~30 countries, ~70% of the world’s assets.
- Index description: https://www.spglobal.com/spdji/en/indices/equity/sp-global-1200/#overview
- Index tracking: https://www.google.com/finance/quote/SPG1200:INDEXSP
More info/impact analysis:
Following the precedence set by the recent mirrored SPY (Mirror) and its success (>$10M liquidity), I noticed interest and a few discussions for a globalized index fund asset without any proposal properly fleshed out. Terra is not U.S. based, so the obsession with U.S. equities is actually surprising to me, and I think the community would benefit from exposure to the global set.
Napkin estimates of various index fund providers shows that international indices comprise a significant fraction of total ownership compared to U.S. funds, even within the United States. For example from Vanguard, VTIAX/VTSAX ownership is ~25%, representing a large enough potential liquidity to sustain itself in Mirror based on mSPY adoption.
In my opinion, the major value proposition of adding a global index fund asset is Terra/Mirror could possibly exist in the far future, while the United States is not likely to be the global hegemon for the rest of eternity. If I want to lock up assets on a long timescale in Terra and keep them well diversified against all odds, such as for a retirement account, this becomes important. Other use cases for a universal and persisting mirrored asset (more likely to last for decades than individual assets) could eventually include a recurring-smart-contract (doesn’t exist yet) that pulls a safe withdrawal rate from such a asset, like a dynasty or perpetual care fund, or even just an annuity.
A major challenge is in index selection. The global index should include all countries in an unbiased way, e.g. looking at the market cap of all possible equities without limiting selection to any country. Unfortunately a golden standard international index certainly doesn’t exist yet in the same way that the SP500 is a popular standard for US markets, and changes frequently. Still there is a need for international mirrored assets at the current time, and the best index today could still last years or decades until such a golden standard is universally adopted.
The best global index is probably the MSCI ACWI, e.g. Morgan Stanley Capital International’s All Country World Index Fund. Launched on Jan 01, 2001, as of 2021 it covers ~3,000 securities across large and mid-cap size segments and across style and sector segments in ~50 developed and emerging markets, representing ~85% of the global investable equity opportunity set. Its methodology seems to account for including as many securities as is reasonably necessary or feasible, and is widely adopted enough. However, unlike the simpler SP500 or SP1200 indices, MSCI has more power to change their complex methodology as they please, so in order to satisfy the likelihood of the asset keeping up with the vicissitudes of time over decades, the proposal may deter the uber libertarian segment of Mirror users.
Another option that may appeal to Mirror users is the S&P Global 1200 index, established Sep 30, 1999, which includes ~30 countries ~70 percent of the global stock market capitalization. In my opinion it uses a strange but simple methodology of combining specific regional indexes such as the SP500, SP Asia 50, etc. It does not include the top 1200 securities by market cap regardless of who happens to be the global hegemon at the current moment, as do the MSCI indices. Advantages include the fact that the underlying segments are easier to understand, and less likely to be modified by S&P, e.g. less dependency on institutional needs.
Other less ideal options I’m aware of:
- MSCI ACWI IMI or All-Cap Index, the latter of which covers 14,000 securities including small and micro cap, essentially an attempt at covering as much of the world as possible. Unfortunately the index is currently only calculated once daily, and not obviously adopted in any popular ETF. There could be liquidity/drift problems with Mirror protocol for a once-a-day index, although I imagine once this is widely adopted, it will supersede the MSCI ACWI.
- MSCI World Index, calculated since ~1969, includes ~1,500 securities from ~20 countries, notably excluding emerging markets. Older, but less representative of the entire world.
- Individual funds per country, dozens of which would all compete for precious liquidity and governance support.
- ex-US funds, which would not compete for mSPY liquidity in theory, at the dire expense of the new fund’s liquidity.
There are some obvious existential risks in getting the asset off the ground (e.g. avoiding total liquidation). There is likely a smaller current interest from the existing Mirror user base, given that all or nearly all existing mAssets are U.S. based. There will likely be a lower trading volume for global index fund assets, as they are often perceived as long-term stable assets, which may not sustain overall liquidity. Interest and investment is not likely to be from fiat/establishment in the short-term, but perniciously scalped from the existing mSPY fund.
But I feel the addition is inevitable, and fantasize about moving retirement funds into a decentralized holder with 0% management fees, which beats any established mutual fund company by a longshot. The proposed asset could be just one more Lehman-brothers-incident away from massive adoption .
(Formal Mirror poll in progress pending community interest - I may create a poll for both mACWI and mSPG1200 depending on general feedback).