MSCI World vs MSCI ACWI: Key Differences
MSCI (Morgan Stanley Capital International) is one of the leading providers of stock market indices used by investors and fund managers around the world. Among its many indices, two of the most important are the MSCI World and the MSCI ACWI (All Country World Index), both designed to provide global exposure to equity markets. However, there are key differences between them that make each one more or less suitable depending on your investment strategy. In this article we look at their main features, how they differ and which one might be the best fit for your needs.
What is the MSCI World?
The MSCI World is a benchmark index that represents the equity markets of developed countries. It is made up of shares from companies in 23 countries and offers exposure to more than 1,500 companies. Its aim is to reflect the performance of developed economies, excluding emerging markets.
Key Features of the MSCI World
- Includes only developed markets.
- Represents roughly 85% of the market capitalisation of each market it covers.
- Made up of more than 1,500 shares of large- and mid-cap companies.
- Its main markets are the United States, Japan and the United Kingdom, with a heavy weighting in sectors such as technology, healthcare and consumer goods.
- Does not include emerging markets such as China, India or Brazil.
What is the MSCI ACWI?
The MSCI ACWI (All Country World Index) is a global index covering both developed and emerging markets. In total, it represents more than 2,900 shares of companies from 23 developed countries and 25 emerging markets, providing a broader view of the world market.
Key Features of the MSCI ACWI
- Includes both developed and emerging markets.
- Made up of more than 2,900 companies, which provides greater diversification.
- Represents roughly 85% of global market capitalisation.
- Its main markets are the United States, China, Japan and the United Kingdom.
- By including emerging markets, its geographic diversification is broader.
Key Differences Between the MSCI World and the MSCI ACWI
| Feature | MSCI World | MSCI ACWI |
|---|---|---|
| Number of countries | 23 (developed) | 48 (developed + emerging) |
| Number of companies | ~1,500 | ~2,900 |
| Market cap coverage | 85% of developed markets | 85% of the global market |
| Includes emerging markets | ✘ No | ✔ Yes |
| US exposure | High (~70%) | High, but lower than the MSCI World |
| Diversification | Less diversified | Greater diversification |
Which one should you choose?
The choice between the MSCI World and the MSCI ACWI will depend on each investor's strategy.
- If you want exposure to developed markets with lower volatility, the MSCI World is a good option. This index tends to be more stable because it excludes emerging markets, which are usually more volatile but also offer greater growth potential.
- If you prefer global diversification that includes emerging markets, the MSCI ACWI is a more complete alternative. It gives you exposure to countries with growing economies, such as China, India and Brazil, which can offer greater opportunities over the long term.
Conclusion
Both the MSCI World and the MSCI ACWI are global indices widely used in passive investing and in index funds. The key difference is that the MSCI ACWI offers broader diversification by including emerging markets, while the MSCI World focuses solely on developed economies. The best option will depend on your risk profile and your investment strategy.
If you are considering investing in index funds or ETFs based on these indices and aren't sure which to choose, speak to a financial adviser to make an informed decision.
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