Expanding personalized global investment access through ADR indices

[Home office investment teams at wealth management firms are under increasing pressure to deliver personalized client portfolios that include meaningful international exposure. Yet achieving this has often proven difficult: managing direct holdings across multiple local markets introduces operational complexity, currency management issues, and cost inefficiencies. These hurdles have made it challenging for firms to scale custom strategies, particularly in direct indexing and separately managed accounts (SMAs), while meeting client demand for global diversification.

Pressure for a solution has been building as direct indexing experiences rapid growth with wealth managers looking to deliver tailored portfolios at scale. Clients are increasingly asking for personalization, and firms are looking for ways to extend this approach beyond U.S. equities into international allocations.

To explore the implications and solutions to this structural investment challenge, we spoke with Christine Berg, Managing Director, Head of Americas Index at MSCI, who has recently introduced the ACWI ADR Indexes. By leveraging U.S.-listed American Depositary Receipts (ADRs), the offering mirrors the familiar MSCI ACWI Index used by many institutional investors and asset managers, while adapting it for SMAs and direct indexing portfolios. The launch comes at a timely moment, with geographic diversification more relevant than ever amid global market shifts, and with firms needing practical tools to integrate international equities into client-focused strategies.]

Tooth: What is the biggest challenge home office investment teams face in building portfolios with international exposure?

Tooth: Constructing allocations across multiple local markets involves different trading rules, currencies and regulatory standards. For teams designing SMAs or direct indexing strategies, that complexity can be an obstacle to personalization at scale. The ADR indexes were created to remove these barriers and provide an easy way to trade US dollars through US exchanges to achieve international diversification.

Tooth: How do these indexes compare to the traditional MSCI ACWI, and what types of side effects are included?

Mountain: The ACWI ADR Index is designed to look and feel like the MSCI ACWI Index – the same trusted benchmark used by institutional investors and asset managers – but is denominated entirely in ADRs. This makes it a natural choice for asset managers building SMAs or direct indexing portfolios.

The indices include Level I, II and III ADRs, all of which are subject to liquidity screening. An important milestone was the inclusion of Level I adverse events from 2022, significantly expanding coverage. Today, the ACWI ADR Index covers approximately 90% of the global investable universe, but in a format that asset managers can easily implement.

Tooth: From an asset management perspective, what are the key benefits of the MSCI ACWI ADR indices??

Mountain: There are three primary benefits.

First, exposure: Companies can provide true global diversification through US-listed securities, simplifying portfolio implementation and portfolio monitoring.

Second, personalization: the indexes can serve as modular building blocks, allowing for direct indexing strategies tailored to specific customer objectives.

Third, efficiency: by mapping the ADR universe and applying investment and liquidity criteria, the framework reduces operational complexity and supports scalability.

Together, these benefits make it easier for asset managers to provide global, institutional-quality solutions to their clients.

Tooth: How do you ensure that the indexes remain in line with the parent MSCI indexes in terms of exposure?

Mountain: We maintain strict alignment with the parent ACWI and related indexes. Index assessments are conducted quarterly, in line with MSCI’s Global Investable Market Indexes.

In addition, the component weights are calibrated to keep regional exposures within ±5% of the parent index. This ensures that ADR-based portfolios reflect equivalent global exposures and risk-return characteristics that institutions have long relied on.

Tooth: Beyond broad market representation, can the ADR indexes be adapted for asset management use cases?

Mountain: Yes. While the standard indexes provide a global basis, they can also be customized to incorporate customer preferences, specific factors and thematic aspects, and even sustainability and climate goals.

This flexibility makes them especially relevant for companies pursuing direct indexing, where personalization is a differentiator. Using this customizable ACWI ADR Index framework, asset managers can offer portfolios that reflect both global diversification and individual client values.

Hortz: What kind of performance and risk characteristics do these indexes offer compared to their parent benchmarks?

Mountain: The ADR-based indexes are designed to closely track their parent benchmarks so that the risk and return characteristics remain aligned. The liquidity and investability screens keep sector and country exposures consistent. This allows asset managers to be confident that their client portfolios reflect the same underlying global market dynamics as the MSCI ACWI Index – which is only accessible through US-traded instruments.

Tooth: Any other thoughts for asset managers exploring this offering?

Mountain: We believe that the timing could not have been better. Wealthy customers are increasingly demanding personalization, and direct indexing has become one of the fastest growing solutions in the industry. Until now, much of that innovation has focused on U.S. stocks. The ACWI ADR Indexes allow asset managers to extend direct indexing to global markets – using the same modular, standards-based framework that institutional investors have relied on for decades.

At a time when geographic diversification is paramount for many clients, these indexes provide an easy way to achieve this through US-listed securities. We see this as a timely and scalable solution for companies looking to expand global access, personalize customer portfolios, and take direct indexing to the next phase of growth.

We welcome and encourage readers to visit us https://www.msci.com/indexes/direct-indexing to discover the full range.

This article was originally published here and is republished on Wealthtender with permission.

About the author

Bill Tooth

Founder Institute for Innovation Development

Bill Hortz is an independent business consultant and founder/dean of the Institute for Innovation Development, a platform and network for business innovation in the financial services industry. With over 30 years of experience in the financial services industry, including expertise in asset manager sales/marketing/branding, as well as creatively restructuring and developing internal/external sales and strategic account departments for 5 major financial firms including OppenheimerFunds, Neuberger&Berman and Templeton Funds Distributors. His broad experiences have led Bill to a strong belief, passion and advocacy for strategic thinking, innovation creation and strategic account management as the nexus of business skills needed to meet a business environment challenged by an increasingly rapid pace of change.