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14 November 2025
3 mins 30 secs read
Australian investors are accustomed to high levels of concentration in the local market where banks and miners dominate the S&P/ASX 200 Index. This trend is now playing out globally.
In October 2025, NVIDIA represented around 5% of the MSCI World Index, making it the single-largest individual holding1. To put this in perspective, the MSCI World Index holds more NVIDIA stock than the entire country weights of Japan, the UK and Germany in the index. The US, with the Magnificent 7^, now represents 73% of the MSCI World Index, up from 61% in 20152.
This concentration of mega-caps increases the risk for investors in a passive ETF tracking the index, as any performance issues among the top-weighted stocks now have a larger impact on the overall index performance than they did in the past. We have also seen that fundamental equity active managers have struggled to consistently outperform the index, as not holding one or two of these key stocks can result in large deviations from the index’s returns. As a result, many investors have understandably chosen index, or passive investing as their core strategy.
The MSCI World Index is designed to represent global markets by covering about 1,300 large and mid-cap stocks across 23 developed countries. Capturing about 85% of the market capitalisation in each market, it has become a cornerstone for passive investors looking to access global shares.
Indexes, like MSCI World, are composed using a rules-based approach:
For inclusion in the index, companies must meet strict criteria around country, company size, liquidity and other metrics
Once included, companies within an index are generally weighted by total company size (market capitalisation)
Indexes generally rebalance once a quarter or once every six months
But the question is, why stop there, when technology and data have evolved so much?
Index funds have been around since the 1970s, and passive ETFs since the 1990s3. And while many of the stocks comprising these indices have changed over time, the underlying rules-based methodology has remained the same.
A systematic, or quantitative investment approach can be more reactive to the challenges of concentration and other market inefficiencies. Instead of just following an index via a passive strategy, our systematic ETFs start with the index as their investible universe and apply a robust quantitative process to select and weight stocks with the aim of delivering consistent, albeit moderate, alpha.
For example, if a company’s fundamentals appear stretched following a period of rapid growth, a systematic model may indicate that a lower weighting may be sensible. This can reduce risk and give a systematic investing manager scope to find other opportunities.
Scrutiny of the company’s valuation metrics relative to its peers and its history, evaluation of its balance sheet and the sustainability of its earnings, and a more in-depth analysis of exactly what is driving investor sentiment, are all important systematic considerations when determining the position to take on every stock.
As such, a systematic portfolio aims to apply a more rational and evidence-based lens to the portfolio whether in highly concentrated markets or during periods of market volatility.
The systematic investment process can construct diversified and highly calibrated portfolios which seek outperformance, while maintaining risk-aware exposure across the mega-caps and emerging megatrends, such as Artificial Intelligence.
A systematic portfolio – such as Macquarie Core Global Equity Active ETF (ASX: MQEG) – incorporates more sophisticated considerations for each company’s portfolio weight, rather than the simplistic metric of market cap alone.
MQEG starts with the MSCI World Index – that is its investible universe. From there, it systematically selects between 200 and 500 global stocks, and makes slight tweaks to the weights for every stock. This is based on rigorous evaluation of 100 million data points a week and over 70 quantitative signals.
Macquarie’s systematic model also recalibrates the portfolio every few weeks, typically making small adjustments to individual stock weights. This frequent data-driven rebalancing enables the strategy to respond more swifty to market developments, unlike the index which typically adjusts only on a quarterly or six-monthly basis.
Blair Hannon, Head of ETFs, ANZ at Macquarie Asset Management, likens investing in an index ETF to using Google circa 2005. 2005 Google would give you search results – but when comparing to 2025, we can now also access a more sophisticated, AI-enabled search engine.
Systematic is like a levelled-up index fund – it’s the next iteration.”
Blair Hannon, Head of ETFs, ANZ at Macquarie Asset Management
Passive fund investors are already comfortable with a rudimentary algorithmic approach through index investing. Systematic brings it into the 21st century, increasing the intelligence behind portfolio decisions.
Systematic investing combines the best of index and active approaches, using advanced data and technology to build adjusted portfolios. As markets become more concentrated and volatile, this strategy offers investors a way to seek consistent, incremental returns while managing risk.
The Macquarie Core Global Equity Active ETF (ASX: MQEG) provides exposure to a diversified portfolio of global equities through securities listed, or expected to be listed, on global developed market exchanges.
One of the key factors also driving investors to passive ETFs are the low fees.
Although MQEG is actively managed, its fee structure is designed to optimise for growth and align with investor interests. The Fund charges a cost-effective management fee of just 0.08%, plus a performance fee that only applies when it beats the index*. This means investors pay only 0.08% - equivalent to $80 per year for every $100,000 invested – unless the fund's performance exceeds the index return.
Explore the Macquarie Core Global Equity Active ETF (ASX: MQEG) here.
^The Magnificent 7, companies include Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta, and Tesla.
*The performance fee is 20% of the cumulative outperformance of the Fund (after the management fee and expenses) above the return of the Index, subject to a high watermark. Refer to the Product Disclosure Statement for further information on the fees and costs.
1. https://www.ainvest.com/news/nvidia-surpasses-japan-china-uk-market-dominance-5-04-msci-country-world-index-2510/
2. S&P Dow Jones Indices, SPIVA U.S. Scorecard Mid-Year 2025
3. SPDR S&P 500 ETF Trust (SPY), created by State Street Global Advisors 1993
All investments carry risk. Different investments carry different levels of risk, depending on the investment strategy and the underlying investments. Generally, the higher the potential return of an investment, the greater the risk (including the potential for loss and unit price variability over the short or long term). The risks of investing in the Funds include:
Investment risk: The Fund seeks to generate higher income returns than traditional cash investments. The risk of an investment in the Fund is higher than an investment in a typical bank account or term deposit. Amounts distributed to unitholders may fluctuate, as may the Fund’s unit price. The unit price may vary by material amounts, even over short periods of time, including during the period between a redemption request being made and the time the redemption unit price is calculated.
Market risk:The investments that the Fund has exposure to are likely to have a broad correlation with share markets in general. Share markets can be volatile and have the potential to fall by large amounts over short periods of time. Poor performance or losses in domestic and/or global share markets are likely to negatively impact the overall performance of the Fund.
Manager risk:There is no guarantee that the Fund will achieve its performance objectives, produce returns that are positive, or compare favourably against its peers, or that the strategies or models used by the Investment Manager will produce favourable outcomes.
More information on the risks of investing in the Fund is contained in the Product Disclosure Statement, which should be considered before deciding to invest in the Fund.
Important information
The Macquarie Core Global Equity Active ETF is designed for consumers who: are seeking capital growth and income distribution, are intending to use the Fund as a core component, minor or satellite allocation within a portfolio, have a minimum investment timeframe of five years, have a high or very high risk/return profile for that portion of their investment portfolio, and require the ability to have access to capital within one week of request.
The Target Market Determination (TMD), available at macquarie.com/mam/tmd, includes a description of the class of consumers for whom the Fund is likely to be consistent with their objectives, financial situation and needs.
The Macquarie Core Global Equity Active ETF is a separate class of units in the Macquarie Core Global Equity Fund (ARSN 674 553 201). A separate class of units is not a separate managed investment scheme.