Key Takeaways
- WEBS are ETFs tracking MSCI country equity indexes.
- Traded on AMEX like regular stocks.
- Provide low-cost international market exposure.
- Rebranded as iShares MSCI ETFs after 2000.
What is World Equity Benchmark Series (WEBS)?
The World Equity Benchmark Series (WEBS) refers to exchange-traded funds (ETFs) originally launched to track Morgan Stanley Capital International (MSCI) country-specific equity indexes, providing U.S. investors an efficient way to access foreign stock markets. These ETFs traded on the American Stock Exchange (AMEX) and were designed to replicate the performance of MSCI indexes by holding stocks in market-cap-weighted proportions.
WEBS, also known as World Equity Benchmark Shares, allowed investors to diversify internationally without purchasing foreign shares directly, a significant advantage in navigating the global macro environment and currency risks.
Key Characteristics
WEBS ETFs offered several distinct features suited for international investing:
- Index Tracking: Each ETF mirrored an MSCI country or regional index weighted by free-float market capitalization, similar to the EAFE Index.
- Exchange-Traded: Shares traded intraday on AMEX, enabling flexibility like buying, selling, and short-selling.
- Low Cost: WEBS provided cost-effective access to foreign equities without the higher fees of direct foreign investment.
- Diversification: Exposure to baskets of stocks reduced company-specific risk across developed and some emerging markets.
- Rebalancing: Monthly updates aligned ETF holdings with index changes, maintaining accurate market representation.
How It Works
WEBS ETFs function by replicating MSCI country indexes through a portfolio of underlying stocks held by the fund issuer. The issuer maintains stock proportions reflecting the index’s free-float market capitalization, ensuring the ETF’s price performance closely tracks the benchmark.
Because WEBS shares trade like stocks on AMEX, you can access international markets during U.S. trading hours with the liquidity and simplicity of domestic equities. This structure reduces foreign transaction complexities and allows tactical asset allocation within your portfolio.
Examples and Use Cases
WEBS enabled investors to target specific countries or regions using ETFs tied to MSCI indexes. Examples include:
- Japan Exposure: A WEBS fund tracking the MSCI Japan Index held major firms like Toyota and Sony, offering diversified access to Japanese equities.
- Broad International Investing: Investors seeking global coverage might combine WEBS with funds like IVV or IXUS to balance U.S. and international holdings.
- Portfolio Diversification: Using WEBS ETFs in your tactical asset allocation strategy can help adjust country exposure based on market conditions.
Important Considerations
While WEBS provided a convenient vehicle for international equity exposure, note that the original WEBS branding has been phased out and replaced by iShares MSCI ETFs under BlackRock. Modern equivalents maintain the same index-tracking principles but may differ in fees and liquidity.
Keep in mind that investing in country-specific ETFs exposes you to geopolitical and currency risks inherent to those markets. Understanding the global tactical asset allocation approach can help you manage these risks effectively within your portfolio.
Final Words
WEBS offered a straightforward way to access international equity markets through U.S.-listed ETFs tracking MSCI country indexes. To explore global diversification, compare current iShares MSCI ETFs that evolved from WEBS and evaluate their fit within your portfolio.
Frequently Asked Questions
WEBS are exchange-traded funds (ETFs) that track Morgan Stanley Capital International (MSCI) country-specific equity indexes, allowing investors to gain exposure to foreign stock markets by trading shares like stocks on the American Stock Exchange (AMEX).
Each WEBS ETF corresponded to an MSCI country or regional index, holding underlying securities weighted by free-float market capitalization to closely mirror the index's performance. These shares traded intraday on AMEX like stocks.
WEBS covered 17-18 MSCI indexes including developed and some emerging markets like Australia, Canada, Japan, Germany, Hong Kong, Mexico, and the United Kingdom, as well as broader regional indexes for Europe, North America, and Asia Pacific.
WEBS provided investors with easy international exposure without needing to buy foreign stocks directly, reducing costs and currency risks. They also supported buying, selling, short-selling, margin trading, and portfolio diversification at low cost.
The original WEBS ETFs were rebranded around 2000-2001 as iShares MSCI ETFs under Barclays Global Investors, now part of BlackRock. While the 'WEBS' name is no longer used, the products continue under the iShares MSCI brand.
WEBS ETFs tracked MSCI indexes that were updated monthly, with the ETF holdings adjusted accordingly to maintain alignment with the underlying market capitalization weights.
Because WEBS ETFs traded on the AMEX like regular stocks, investors could buy and sell shares throughout U.S. market hours, access international markets without currency conversion, and use strategies like short-selling and margin trading.
