At the end of March, MSCI rolled out a new family of emerging market indexes that includes companies according to their economic exposure rather than their country of domicile.
The MSCI Economic Exposure Indices have been designed to reflect the fact that many organizations have significant exposure to regions outside the country in which they are based.
The index provider cited Nestlé as an example of the type of firm it was looking to reflect—although it is a Swiss-domiciled company, only 2.15 percent of its revenues come from Switzerland, while emerging markets countries account for 35 percent of its revenues.
The initial launch included five indexes, all emerging markets based, though there are likely to be further launches in the economic exposure family based on other regions. The new benchmarks include the MSCI World with EM Exposure Index, the MSCI EAFE with EM Exposure Index, the MSCI USA with EM Exposure Index, the MSCI Europe with EM Exposure Index and the MSCI World ex-Israel with EM Exposure Index.
The indexes use an MSCI parent index as the index universe and then reweight selected constituents according to their market capitalization and economic exposure to the emerging markets. The two world indexes have 300 constituents, the EAFE has 200 and the Europe and USA indexes have 100.