The MSCI World ETF’s Record Run Masks a Hidden Concentration Risk

As December 2025 unfolds, the iShares MSCI World ETF continues its relentless climb, setting successive record highs and charting a course for an annual return exceeding 20%. However, the fund’s reputation for providing perfect global diversification is becoming increasingly misleading. With US technology stocks exerting extreme dominance, investors are compelled to ask a critical question: does this product offer a genuine stake in the world economy, or is it merely a concentrated, indirect bet on American tech?

A Lopsided Reliance on US Tech

The “World” label implies broad international exposure, but the reality at the close of 2025 tells a different story. The ETF’s stellar performance is almost entirely tethered to the fortunes of US equity markets and the sustained boom in artificial intelligence (AI). European markets, by contrast, are grappling with weaker growth dynamics. This environment has allowed the fund’s substantial US weighting to function as both a protective shield and its primary performance engine. A prevailing market narrative anticipating a “soft landing” for the US economy has provided additional tailwinds.

A Quiet Rebalancing

MSCI’s semi-annual index review, which took effect in late November, passed without causing major disruptions. While the broader ACWI Standard Index saw 69 new additions, the adjustments for the MSCI World ETF were more nuanced. The rebalancing primarily served to fine-tune exposure to mid-cap growth stocks and account for shifts in market liquidity conditions.

Should investors sell immediately? Or is it worth buying MSCI World ETF?

The Perils of a Top-Heavy Portfolio

Despite holding approximately 1,323 companies across 23 developed nations, the ETF’s risk profile has intensified. A significant concentration has emerged: the ten largest positions now account for nearly 28% of the entire fund’s assets. This creates a substantial single-point risk, meaning the fortunes of the overall portfolio are effectively dependent on the performance of a handful of mega-cap stocks.

Looking ahead to 2026, the valuation of these top holdings will be the decisive performance factor. Should the lofty expectations for AI-driven productivity gains fail to materialize, the ETF’s top-heavy structure leaves it vulnerable to pronounced setbacks. This vulnerability exists independently of economic stability in other global regions covered by the fund.