iShares Core MSCI World is deviating from benchmark. Why?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
vstariradev
Posts: 21
Joined: Wed Nov 02, 2016 9:43 am

iShares Core MSCI World is deviating from benchmark. Why?

Post by vstariradev » Fri Jun 16, 2017 3:08 pm

Hi,

Yesterday iShares Core MSCI World ETF (IWDA/SWDA) issued a new factsheet where they show the current top holdings %:
TOP HOLDINGS (%)
GBP CASH 5.31
APPLE INC 2.17
MICROSOFT CORP 1.39
AMAZON COM INC 1.09
FACEBOOK CLASS A INC 0.96
JOHNSON & JOHNSON 0.95
EXXON MOBIL CORP 0.90
ALPHABET INC CLASS C 0.82
JPMORGAN CHASE & CO 0.79
ALPHABET INC CLASS A 0.79
15.17

At the same time the benchmark the ETF is supposed to follow "MSCI WORLD INDEX (USD)" has these as top holdings:
APPLE US 814.56 2.22 Info Tech
MICROSOFT CORP US 515.88 1.41 Info Tech
AMAZON.COM US 401.72 1.10 Cons Discr
FACEBOOK A US 354.54 0.97 Info Tech
JOHNSON & JOHNSON US 348.91 0.95 Health Care
EXXON MOBIL CORP US 333.81 0.91 Energy
ALPHABET C US 299.67 0.82 Info Tech
JPMORGAN CHASE & CO US 293.95 0.80 Financials
ALPHABET A US 292.26 0.80 Info Tech
NESTLE CH 265.85 0.72 Cons Staples
Total 3,921.15 10.69

Why is the ETF holding so much GBP CASH and won't that produce too much tracking errors to eventually lose investor trust?

Here is the ETF factsheet:
https://www.ishares.com/uk/individual/e ... -en-gb.pdf

Here is the benchmark factsheet:
https://www.msci.com/documents/10199/14 ... fcb5bd6523

Regards,
Vladimir

User avatar
JoMoney
Posts: 4399
Joined: Tue Jul 23, 2013 5:31 am

Re: iShares Core MSCI World is deviating from benchmark. Why?

Post by JoMoney » Fri Jun 16, 2017 3:23 pm

Is it possible the "cash" is offset by a levered futures/options/derivatives investment?
In US based funds it's not uncommon to see an index fund with something like a 105% position invested in the index with a portion of it 'synthetic' with derivatives along with a 5% cash holding.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

vstariradev
Posts: 21
Joined: Wed Nov 02, 2016 9:43 am

Re: iShares Core MSCI World is deviating from benchmark. Why?

Post by vstariradev » Fri Jun 16, 2017 3:26 pm

JoMoney wrote:Is it possible the "cash" is offset by a levered futures/options/derivatives investment?
In US based funds it's not uncommon to see an index fund with something like a 105% position invested in the index with a portion of it 'synthetic' with derivatives along with a 5% cash holding.
I doubt that's the case as this fund uses an "optimized" replication method and is not synthetic.

Regards,
Vladimir

Theoretical
Posts: 1072
Joined: Tue Aug 19, 2014 10:09 pm

Re: iShares Core MSCI World is deviating from benchmark. Why?

Post by Theoretical » Fri Jun 16, 2017 6:17 pm

It looks like the collateral for the securities lending done by the fund.

Post Reply