MSCI World vs. FTSE All-World Compared
MSCI World versus FTSE All-World is not a contest between two equals — it is the question of whether emerging markets belong in your portfolio. The MSCI World covers only developed markets with around 1,400 stocks; the FTSE All-World adds emerging markets at roughly 10% weight, with around 4,000 stocks in total.
At product level, this usually means choosing between an iShares or Xtrackers World ETF and the Vanguard FTSE All-World. A look at methodology, return history and product data shows what actually matters — and what is marketing folklore.
The structural difference: EM share and coverage depth
FTSE and MSCI slice the market differently: FTSE classifies South Korea as a developed market, MSCI as emerging — so the FTSE All-World always contains Korea, the MSCI World never does. The FTSE All-World also reaches slightly deeper into mid caps with roughly 90% market coverage versus ~85% for the MSCI World. Neither contains true small caps — for those you need the MSCI ACWI IMI.
The return effect of the EM allocation has historically been small: over the past 10–15 years, World and All-World were mostly less than one percentage point apart per year, recently favouring the more US-heavy MSCI World. Both indices are roughly 60–70% US — the EM question is a ~10% marginal weighting, not a fundamentally different portfolio.
| Criterion | MSCI World | FTSE All-World |
|---|---|---|
| Constituents | ~1,400 | ~4,000 |
| Emerging markets | No | Yes (~10%) |
| South Korea | No | Yes |
| Market coverage | ~85% of developed markets | ~90% incl. EM |
| US share | ~70% | ~60–65% |
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Product level: Vanguard vs. iShares and co.
The FTSE All-World is effectively Vanguard territory: the Vanguard FTSE All-World UCITS ETF (TER around 0.22%, accumulating or distributing) is one of Europe’s largest ETFs with double-digit billions in assets. The MSCI World, by contrast, sees broad competition — iShares Core, Xtrackers, Amundi, SPDR — with TERs from around 0.12%.
More important than the TER is the tracking difference: large World ETFs recoup part of their costs through securities lending and efficient replication, and the Vanguard ETF also tracks its index tightly. In practice, real cost differences often come down to a few basis points — on a €100,000 portfolio we are talking about €10–30 per year. For German investors, all variants are equity funds with the 30% partial exemption; the accumulating vs. distributing choice matters more for the advance lump-sum tax (Vorabpauschale).
Decision: when each index is the better choice
The honest answer: for long-term wealth building, the difference is secondary — both indices deliver globally diversified equity returns of historically around 7–8% p.a. nominal. The choice is structural:
- FTSE All-World: if you want a one-fund solution including emerging markets and never want to think about EM allocation again.
- MSCI World: if you want to manage the EM share separately (e.g. World + EM ETF) or take advantage of the wider product range with lower TERs.
- Both in parallel: rarely sensible — the overlap is well above 80%, so you effectively hold the same market twice.
If you already hold both (or World + S&P 500, see MSCI World vs. S&P 500), check the actual overlap with a look-through analysis instead of merely assuming diversification.
Frequently asked questions
What is the main difference between MSCI World and FTSE All-World?
The FTSE All-World additionally includes emerging markets at roughly 10% weight (including South Korea) and covers about 90% of the market with around 4,000 stocks. The MSCI World covers developed markets only.
Which index has performed better?
Recently the MSCI World, as its higher US share benefited from the US tech rally. The difference has historically been mostly under one percentage point per year — and the sign can flip.
Can I combine MSCI World and FTSE All-World?
Technically yes, sensibly rarely: the overlap is well above 80%. If you want emerging markets, the All-World alone or World plus a separate EM ETF is the cleaner setup.
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