The concept of the investable world refers to the portion of the global economy that is accessible and available for investment by individuals and institutions. As emerging markets open up and financial systems develop globally, the investable world is expanding over time. Understanding the scope and growth trends of the investable world allows investors to identify new opportunities and tailor investment approaches accordingly.
Definition and calculation methodology of the investable world
The investable world is often defined and quantified by major index providers such as MSCI and FTSE. For example, MSCI estimates that its All Country World Investable Market Index (ACWI IMI) covers about 99% of the global investable equity opportunity set. The scope and calculation methodology may differ slightly between providers, but generally aims to capture the portion of the total global economy that is realistically investable based on market access, size, liquidity and other factors.
Historical trends and future projections
The investable world has experienced steady expansion over the past few decades thanks to financial market development, economic growth and globalization trends. As of 2022, MSCI ACWI IMI covers over 9,000 securities across developed and emerging markets. China’s weight has increased partly due to the opening of its domestic A-shares market. Going forward, further emergence of frontier markets and integration of environmental, social and governance (ESG) factors into the investable universe will shape the future evolution path.
Implications for global investors
The growing investable world presents new diversification opportunities for investors seeking global exposure. However, concentration and home bias persists in certain markets like the US. Understanding the industry and geographic revenue exposure driving the investable world can lead to more balanced allocations aligned with global economic growth patterns rather than just market capitalization weights.
The investable world represents the portion of the total global economy that is open and accessible for investment. It has expanded significantly thanks to financial market developments, and is projected to continue growing as more emerging and frontier markets integrate. Tracking its size, scope and shifts allows investors to capitalize on diversification benefits and new opportunities.