World ETF vs All-World ETF: what is the difference?

World and All-World sound almost identical.

Both terms are used for global investments, but they do not necessarily cover the same markets.

At a glance: MSCI World covers large and mid-sized companies from developed markets. FTSE All-World covers both developed and emerging markets. ETFs tracking these indices can therefore have different exposure to countries such as China and India.

The main difference concerns which markets the indices include.

What is MSCI World?

MSCI World is a global equity index developed by MSCI.

It covers large and mid-sized companies from developed equity markets.

These include the US, Japan, Denmark, Germany and the United Kingdom.

Emerging markets are not included in MSCI World.

Chinese and Indian equities are therefore not included as local equity markets in the index.

However, companies in MSCI World may still have revenue, production and other economic activities in China, India and other emerging markets.

Index classification and companies' total economic exposure are therefore different things.

What is FTSE All-World?

FTSE All-World is a global equity index from FTSE Russell.

It covers large and mid-sized companies from both developed and emerging markets.

Its geographic market coverage is therefore broader than MSCI World's.

FTSE All-World is weighted by market capitalisation. Larger companies generally carry greater weight in the index.

Broader market coverage does not mean all countries are equally represented.

MSCI World vs FTSE All-World

The table describes the indices' general methodologies. Their current country allocations and specific holdings can change.

What are emerging markets?

Emerging markets are equity markets that index providers classify as developing markets.

Classification depends on factors such as market size, structure and accessibility to international investors.

China and India are examples of emerging markets in both MSCI's and FTSE Russell's broad global index universes.

However, index providers may classify some countries differently.

Examine the specific index methodology when comparing ETFs.

Is FTSE All-World more diversified than MSCI World?

FTSE All-World covers more geographic markets because it includes emerging markets.

However, broader geographic coverage does not automatically mean lower overall risk.

Both indices are market-capitalisation-weighted, so large companies and markets can account for a significant share.

Emerging markets can also involve particular political, regulatory and currency risks.

It is therefore more precise to say FTSE All-World has broader geographic market coverage than MSCI World than to conclude it is generally less risky.

How much is invested in the US?

The US accounts for a substantial share of many global market-capitalisation-weighted equity indices.

One reason is the large combined market value of US-listed companies.

The precise US weight changes over time.

To examine how much of an ETF is invested in the US, use the current country allocation from the ETF provider or index provider.

A global ETF does not mean the money is evenly spread across the world's countries.

What about MSCI ACWI?

MSCI also has an index called MSCI ACWI.

ACWI stands for All Country World Index.

Like FTSE All-World, MSCI ACWI covers developed and emerging markets.

The two indices are not identical, however.

MSCI and FTSE Russell use different methods for matters such as market classification and company selection.

Their holdings and geographic weights can therefore differ.

What does the difference mean when comparing ETFs?

Imagine you have chosen these criteria:

• You want developed markets exposure.

• You also want emerging markets.

• You want to examine concentration in the US.

• You have no preference for distribution type.

An ETF tracking MSCI World does not meet the criterion for direct emerging markets exposure.

An ETF tracking FTSE All-World does include emerging markets.

This does not tell you whether the ETF meets your other criteria.

Costs, risk, distribution type and country concentration still need to be examined separately.

Wizer Invest lets you compare your chosen criteria with documented characteristics of investments.

Frequently asked questions

What is the difference between MSCI World and FTSE All-World?

MSCI World covers developed markets. FTSE All-World covers developed and emerging markets.

Does MSCI World include China?

China is not included as a local equity market in MSCI World. Companies in the index may nevertheless have economic activities in China.

Is FTSE All-World the same as MSCI ACWI?

No. Both cover developed and emerging markets but use different index methodologies.

Does FTSE All-World include every equity in the world?

No. The index focuses on large and mid-sized companies in the markets it covers.

Is All-World always broader than World?

Not necessarily. Words in a fund's name are not a standardised guarantee of its investment universe. Always examine the specific index.

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This article provides general information, rather than personal investment advice. Index composition can change.