XUSM vs. ACWI ex U.S.: Does an International Momentum Strategy Belong in Your Portfolio?
XUSM and ACWX represent two fundamentally different approaches to international equity investing: active momentum versus passive broad-market exposure. This guide compares how each fund works, examines their track records, and discusses how each approach may fit in your portfolio. All data as of 9/15/2026. All performance data is based on the net asset value (NAV) unless otherwise noted.
Executive Summary
Same Goal, Different Implementation: XUSM and ACWX take fundamentally different approaches to international equity investing. XUSM employs an active, equal-weighted momentum strategy across both developed markets and emerging markets with monthly rebalancing, while ACWX passively tracks the entire MSCI ACWI ex USA Index and only owns developed market stocks on a market-cap-weighted basis.
How Momentum Is Defined: The two funds use fundamentally different selection criteria. XUSM actively selects 50 to 100 stocks based on 6-month trend consistency, whereas ACWX passively holds all index constituents regardless of momentum or trend direction. This distinction shapes portfolio concentration, country and sector exposure, and how each fund responds to changing market conditions.
XUSM Spans Developed and Emerging Markets in One Portfolio: This is the structural gap in the existing international momentum lineup. Every established international momentum ETF splits the ACWI ex-U.S. universe in half — IMTM, IDMO, and PIZ cover developed markets only; EEMO and PIE cover emerging markets only. An investor building a full international momentum allocation from those products must select two funds and decide the developed/emerging split themselves. XUSM applies one momentum process across the entire non-U.S. universe as the momentum signal aims to determine the optimal mix of developed and emerging market exposure.
Risk Management Varies: XUSM's monthly rebalancing and concentrated positioning allow it to rotate toward relative strength during market shifts, while ACWX holds all index constituents at all times regardless of trend direction. The structural difference between active selection and passive ownership directly influences how each fund responds to changing markets.
Portfolio Role Depends on Investor Preference: XUSM may suit investors seeking a higher-conviction, actively managed momentum sleeve with a tighter risk management strategy, while ACWX may appeal to those prioritizing the lowest cost and broad passive international exposure. The right choice depends on whether an investor views momentum as a complement to core holdings, an alternative to broad-market indexing, or both.
How Each Fund Is Built
ACWX – Passive Broad Market Index
ACWX tracks the MSCI ACWI ex USA Index, which holds all constituents of the index in developed and emerging markets outside the United States. Holdings are weighted by market capitalization, with no selection based on momentum, trend, or any other factor signal.
The approach is simple, transparent, and low cost. ACWX's holdings mirror the MSCI ACWI ex USA Index, and the index reconstitutes quarterly based on market-cap, liquidity, and free-float criteria — not performance signals. Every stock in ACWX is a non-U.S. large- or mid-cap company, and the fund's market-cap weighting means its largest positions are the largest companies in international markets. Its country weights reflect the relative market capitalization of each country rather than which markets are currently trending.
XUSM – Quantitative Momentum Built Around Trend Quality
XUSM takes a different approach to momentum investing. Rather than ranking stocks by trailing 12-month returns, the strategy seeks to identify companies exhibiting the most consistent, high-quality upward price trends today. The model uses a 6-month lookback window instead of the traditional 12-month lookback that most momentum ETFs use and evaluates not only total return but the consistency of price movement. Stocks that have advanced steadily over time score more favorably than those with sharp spikes followed by uneven or sideways movement.
The investable universe spans across both developed and emerging markets outside the United States, giving it access to momentum trends that developed-market only or emerging-market only strategies could not include. The strategy does not pre-allocate between developed and emerging markets; the momentum signal determines the regional mix, which means the portfolio's country composition can shift as leadership rotates. The portfolio typically holds 50 to 100 equal-weight positions updated monthly. Stocks with strong, stable momentum are retained, while those showing weakening trends are removed to capture profits and limit further losses. The monthly rebalance allows the strategy to adapt in real time as market conditions shift.
Universe Coverage Across the International Momentum Peer Group
An investor who wants momentum exposure across the full ACWI ex-U.S. universe using the existing peer group has to combine at least two products and make an active developed-versus-emerging allocation decision on top of the momentum decision.
Sources: MarketDesk Indices, issuer prospectuses and fact sheets. As of 9/15/2026. For illustrative purposes only.
Side-by-Side Comparison of Key Characteristics
XUSM and the MSCI ACWI ex USA Index (ACWX) represent fundamentally different investment philosophies. XUSM, launched in September 2026, is an actively managed quantitative momentum ETF with a 0.75% expense ratio and invests across both developed and emerging markets. ACWX, launched in March 2008, is a passive broad-market index ETF with a 0.32% expense ratio and invests in only developed markets.
Portfolio construction differs significantly. XUSM holds 50–100 non-U.S. stocks equal-weighted and rebalanced monthly. In contrast, ACWX owns all companies (~1,800) in the MSCI ACWI ex USA Index, weighted by market capitalization, with no momentum or factor-based selection criteria.
The underlying momentum signals are distinct. XUSM emphasizes consistency and quality of price trends over a six-month lookback to actively select its holdings, while ACWX applies no momentum signal and passively holds the entire index. Since XUSM's inception, these structural differences can produce different outcomes.
Fund Characteristic | XUSM — MarketDesk | ACWX — iShares |
Strategy Type | Active / Quantitative | Passive index |
Expense Ratio | 0.75% | 0.32% |
Inception Date | September 2026 | March 2008 |
# of Holdings | 50–100 | ~1,800 |
Weighting Style | Equal-weight | Market-cap weighted |
Rebalance Frequency | Monthly | Quarterly |
Universe | Developed and emerging markets | Developed and emerging markets |
Developed / Emerging Mix | Determined by momentum signal | Determined by market caps |
Momentum Lookback Period | 6-month lookback period | None (passive broad-market index) |
Momentum Signal | Consistency + quality of price trend | None (holds all index constituents) |
Data as of 9/15/2026. Sources: MarketDesk Indices, issuer prospectuses and fact sheets. For illustrative purposes only.
Comparing ACWX vs XUSM’s Risk Management
The two ETFs manage risk very differently. XUSM's quantitative framework places greater emphasis on recent price data, allowing it to respond more quickly as market leadership shifts. By shortening its effective lookback during periods of stress and rebalancing monthly, the portfolio can rotate away from deteriorating trends toward areas demonstrating relative strength. This process is designed to help improve downside behavior during sharp market corrections rather than remaining anchored to stale momentum signals.
This matters more in international markets than in domestic ones, because leadership rotates along an additional axis. In U.S. equities, momentum shifts primarily across sectors and individual names. Internationally, it also shifts across countries and across the developed and emerging market divide. Because XUSM does not pre-allocate between regions, a country's weight in the portfolio is a function of how many of its companies are currently exhibiting high-quality trends, not of its market capitalization.
ACWX follows a passive broad-market approach with no active risk management or momentum-based repositioning. The fund holds all index constituents at all times, meaning it fully participates in both market rallies and declines. Its country weights are set by relative market capitalization, so a market that has been falling for years retains a substantial weight until its market cap shrinks enough to reduce it. In rapidly changing markets, the MSCI ACWI ex USA Index (ACWX) does not rotate away from deteriorating trends or toward emerging strength as it simply mirrors the index.
The difference in risk management can emerge during extended drawdowns, such as 2008 or 2022. XUSM's monthly rebalance and shorter lookback are designed to shift the portfolio toward relative strength, even as broad equity stress persists. Market corrections don't make capital disappear, they redirect it. When market trends change and previous leaders come under pressure, capital typically rotates elsewhere, and internationally that rotation is often geographic. Leadership changes, which can present new opportunities. By updating monthly and emphasizing recent price behavior, XUSM aims to capture those shifts. ACWX, by contrast, holds every index constituent regardless of trend direction, meaning it always holds positions that may be in declining trends alongside those in rising trends.
Common FAQs
1. Tax Efficiency – Does XUSM's higher portfolio turnover impact the tax efficiency of the fund?
Monthly rebalancing does generate more portfolio turnover than semi-annual rebalancing. However, the ETF structure can help maintain tax efficiency and minimize tax consequences. The in-kind creation and redemption process allows appreciated securities to be transferred out of the portfolio without triggering taxable sales at the fund level, thereby minimizing taxable capital gains. This mechanism, which is standard across U.S. ETFs, allows the strategy to adjust holdings systematically while reducing the likelihood of capital gain distributions to shareholders. To date, XUSM has not made any capital gains distributions. All ETFs, including XUSM, cannot guarantee tax outcomes and investors may still receive taxable distributions. Investors should consult their own tax advisors regarding the tax consequences of an investment in the Fund.
2. Rebalance Timing – XUSM rebalances monthly and actively selects holdings, while ACWX passively holds the entire index. Does this matter?
Yes, rebalance timing can meaningfully impact outcomes. A monthly rebalance allows XUSM to adjust more quickly as market leadership changes, potentially rotating away from weakening trends into emerging ones. In contrast, ACWX makes no active portfolio changes. It holds all MSCI ACWI ex USA constituents at all times. The trade-off is straightforward: active management introduces higher turnover but offers the potential for better risk-adjusted returns, while passive indexing provides the lowest cost and broadest diversification but with no ability to respond to shifting market leadership.
3. Universe Coverage – Why does it matter that XUSM invests in both developed and emerging markets?
Because the alternative is making an allocation decision that the momentum signal could make for you. If an advisor builds an international momentum sleeve from existing products, they typically pair a developed-market fund (IMTM, IDMO, or PIZ) with an emerging-market fund (EEMO or PIE) and then choose the weighting between them. That weighting is a discretionary macro call, and it is usually revisited far less often than the underlying momentum signals refresh. XUSM removes that decision from the process: the portfolio's regional composition is an output of the momentum screen rather than an input. If emerging market leadership strengthens, more emerging market names qualify. If it weakens, fewer do.
4. Portfolio Overlap – How much overlap is there with ACWX?
ACWX holds all the MSCI ACWI ex USA companies, while XUSM typically holds 30 to 50 stocks drawn from both developed and emerging markets. Because XUSM selects only stocks exhibiting the strongest momentum signals and equal-weights its positions, its portfolio will differ substantially from ACWX at any given time—in holdings, in country weights, and in sector exposure. XUSM may hold some ACWX constituents when they exhibit strong momentum, but its equal weighting means position sizes bear no relation to ACWX's market-cap-based weights. The two funds can work as complements: ACWX provides broad international exposure while XUSM offers a concentrated momentum overlay.
5. Fees – Is XUSM's higher expense ratio worth it?
ACWX charges 0.32%, while XUSM charges 0.75%. The difference reflects XUSM's active management and monthly rebalancing versus ACWX's passive indexing. While fees are an important consideration, investors should evaluate outcomes on more than just expense ratios alone. If a strategy's structure leads to materially different performance or risk characteristics, the relevant comparison is total return net of costs.
6. Currency – Is XUSM currency hedged?
Both XUSM and ACWX give U.S. investors unhedged exposure to foreign currencies, meaning returns reflect both local equity performance and the movement of those currencies against the dollar. Because XUSM's momentum signal is measured in U.S. dollar terms, currency trends are already reflected in the score. A market whose equities are flat in local terms but whose currency is appreciating against the dollar will screen as having positive momentum, which aligns the signal with the return a U.S.-based investor actually realizes.
7. Portfolio Allocation – Should I hold XUSM in a Roth or retirement account due to its higher turnover?
FMTM is a momentum strategy, and momentum can lag during sharp market reversals or highly volatile “whipsaw” environments where leadership changes quickly. FMTM may underperform SPY during narrow mega-cap-led rallies where equal-weight positioning lags market-cap weighted strategies. Conversely, SPY may underperform during markets that are trending up or down where active momentum selection captures emerging leadership more effectively.
When to Choose XUSM vs. ACWX
The choice between XUSM and ACWX depends on investment philosophy and portfolio objectives. Both can be used in taxable or tax-advantaged accounts, and both can play distinct roles within a portfolio. XUSM may appeal to investors willing to pay a higher fee for quantitative momentum management focused on trend consistency and quality with built-in risk management. ACWX may suit investors prioritizing the lowest possible cost and the broadest passive international market exposure. XUSM's approach to non-U.S. large- and mid-cap momentum is differentiated by its monthly rebalancing cadence, its concentrated equal-weight positioning, and its coverage of both developed and emerging markets in a single portfolio, which together enable faster response to shifting market leadership. Some investors may use XUSM as a momentum sleeve alongside a core ACWX holding, while others may view it as an alternative to broad international indexing for a portion of their equity allocation.
Consider this when... | XUSM | SPY |
Account type | Taxable or tax-advantaged | Taxable or tax-advantaged |
Fee sensitivity | Willing to pay for active management | Lower cost broad-market exposure |
Momentum philosophy | Trend consistency and quality | None (holds entire index) |
Portfolio role | Higher-conviction, active momentum | Core broad-market exposure |
Universe preference | Developed and emerging markets | Developed and emerging markets |
Rebalance preference | Faster, monthly response to markets | Passive (no active rebalancing) |
Ready to Learn More About XUSM?
To learn more about the strategies or discuss how XUSM fits within a portfolio, contact our team info@marketdeskindices.com.
Performance Disclosure
Short-term performance may often reflect conditions that are likely not sustainable, and thus such performance may not be repeated in the future.
The information contained herein is provided for informational purposes only and is from sources believed to be reliable. However, its accuracy, completeness, or reliability are not guaranteed. MarketDesk Indices LLC makes no representations or warranties concerning the accuracy of any data. There is no guarantee that any opinion in this material will be realized. Nothing herein constitutes or should be construed as an offering of securities or a recommendation to purchase or sell securities. Investors should determine for themselves whether a particular service or product is suitable for their investment needs. Please refer to the disclosure and offering documents for further information concerning specific products or services.
Definitions
MSCI ACWI ex USA Index – MSCI ACWI ex USA Index represented by the iShares MSCI ACWI ex U.S. ETF (ACWX). The MSCI ACWI ex USA Index is a free float-adjusted, market-capitalization-weighted index designed to measure the combined equity market performance of developed and emerging markets countries, excluding the United States, covering approximately 85% of the global equity opportunity set outside the U.S. Indexes are unmanaged and not available for direct investment. References to third-party funds are for informational purposes only and should not be considered investment advice or a recommendation of any particular security, strategy, or investment product.
Developed Markets / Emerging Markets – Country classifications assigned by index providers based on criteria including economic development, market size, liquidity, and market accessibility. Classifications differ across index providers and change over time.
Max Drawdown – The largest decline in the value of an investment from its highest point to its lowest point before a new high is reached. It measures the peak-to-trough loss experienced during a specific period and is commonly used to understand the potential downside risk of a strategy or investment.
Max Drawdown Length – Maximum drawdown length is the amount of time it takes for an investment to recover from its largest peak-to-trough decline and return to its previous high. It measures the duration of the recovery period following the maximum drawdown. For example, if an investment reaches a high, declines significantly, and takes 18 months to regain that prior high, the maximum drawdown length would be 18 months.
Bid/Ask Spreads – Bid-ask spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask) for a security, reflecting market liquidity and transaction costs.
Currency Hedging – The use of financial instruments to reduce or eliminate the effect of foreign exchange rate movements on returns. An unhedged fund passes currency movements through to investors.
ETFAC-5800420-08/26
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