Navigating the debasement trade

Global equity concentration is rising

Global equities have long provided investors with diversification across countries, sectors and companies. Yet beneath that broad exposure, portfolio concentration has increased.

Today, 72% of the MSCI World Index is represented by US companies, up from roughly 44% three decades ago.¹ This reflects years of strong corporate performance, technological leadership and deep capital markets, but it has also changed the nature of global equity diversification.

While many US companies generate revenues globally, their valuations remain influenced by US monetary policy, fiscal conditions, interest rates and the US dollar. As their index weight has increased, so has investors’ exposure to these shared drivers.

At the same time, persistent structural deficits, rising national debt and expansive monetary policy have increased attention on currency debasement—the gradual erosion of fiat currency purchasing power.

What is the debasement trade?

Historically, currency was debased by reducing the precious metal content of physical coins. Today, debasement can occur as governments issue debt and central banks expand the money supply, reducing the purchasing power of each currency unit.

The debasement trade involves shifting exposure from paper-backed liabilities, such as cash and government bonds, toward scarce assets such as gold. Gold carries no credit risk and cannot be created at will by governments, giving it distinct characteristics as a store of value.

For investors, however, adding gold creates a portfolio trade-off. Selling equities to fund a gold allocation reduces exposure to companies that can contribute to long-term capital growth. Managing separate gold positions, futures and collateral can also add complexity.

A capital-efficient approach

The Mackenzie Global Equity & Gold Overlay ETF (MGEG) addresses this implementation challenge by pairing 100% active global equity exposure with a 50% systematic gold futures overlay.

Its equity allocation is invested in the Mackenzie GQE Global Equity ETF (MGQE), managed by Mackenzie’s Global Quantitative Equity team. MGQE uses a disciplined process to identify high-quality, undervalued global companies with attractive growth profiles.

Rather than selling equities to fund its gold exposure, MGEG uses securities-collateralized borrowing against its MGQE holdings to post cash margin for US gold futures. The margin is typically about 5% of net asset value, although requirements can change over time.

Figure 1: How the gold overlay works

As a result, every $100 invested provides $150 of gross economic exposure: $100 of active global equity exposure plus $50 of notional gold futures exposure.

Combining growth and diversification

This structure allows capital to remain fully invested in active global equities while adding systematic gold exposure as a diversifier against inflation and currency dilution.

MGEG also manages the operational requirements—including futures contracts, margin, collateralized borrowing and contract rolls—within a single ETF.

For Canadian investors concerned about global equity concentration and currency debasement, MGEG provides a way to maintain global equity participation while adding gold exposure without requiring a separately funded allocation.

¹ Source: Bloomberg, as at June 30, 2026.

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