Global stock market concentration has risen to its highest level in decades, increasing risk for passive investors. The 10 largest stocks in the MSCI All Country World Index now account for 19.5 per cent of the widely followed benchmark of 23 developed and 24 emerging countries. This is up from less than 9 per cent as recently as 2016 and well above the dotcom era peak of 16.2 per cent in March 2000, according to MSCI data stretching back to 1994.
Nicholas Hyett, investment manager at Wealth Club, a UK-based investment service, said: “For the last decade or so, collective wisdom has said you should just stick your money in a global tracker and leave it at that. After all, what better diversification could there be than investing a little bit in every listed company in the world?” “But lower risk doesn’t mean no risk,” Hyett added. “During the financial crisis the global stock market fell nearly 40 per cent.