MSCI World vs MSCI ACWI

The MSCI World index and the MSCI ACWI index are two popular global stock indices, which many index portfolios track. Although there are some important differences, the long-term performance has been nearly identical.

A quick note investors cannot invest directly in an index. These unmanaged indexes do not reflect management fees and transaction costs that are associated with an investable vehicle, such as the iShares MSCI ACWI ETF (symbol: ACWI) or the iShares MSCI World ETF (symbol: URTH). A reminder that these are simply examples as this site does NOT provide investment recommendations.

Performance

Source: Bloomberg

When comparing the MSCI World Index vs the MSCI All-Country World Index (ACWI), I was surprised by how closely they’ve tracked each other over the past 35 years (through June 30, 2022) since ACWI’s inception in 1987. The annualized difference is just .11%!

The MSCI World Index only includes stocks of developed markets (think the US, Western Europe, Japan, Canada, Australia, etc), while MSCI ACWI includes stocks in both developed and emerging markets (think China, India, Brazil, etc). Since emerging markets have bounced around between 10-15% of global market cap in the past decade or two (and were much smaller prior to that), the risk and returns of the MSCI World and MSCI ACWI indices have been nearly identical.

Current Index Composition

As of Q2 2022, the geographic, market cap, and sector weights are quite similar. Here is a recent MSCI ACWI factsheet and the MSCI World factsheet.

  • MSCI World is 100% developed markets, while MSCI is 88% developed markets and 12% emerging markets.
  • Even thought both indices are broad-based in terms of market capitalizations, both are market cap weighted and heavily tilted towards large-cap stocks.
  • Additionally, the MSCI ACWI and MSCI World have nearly identical sector weights.

Conclusions

What does this mean for investors? Since the risks and returns of the indices are nearly identical, selecting an investment vehicle and cost structure may matter more than selecting the index. A fund investor might select MSCI ACWI due to the greater geographic diversification (especially with a large index fund that invests in local exchanges), while an SMA investor might opt for MSCI World due to cost considerations. Of course, the next 35 years could be completely different than the past 35 years!

Further Reading

Interestingly, a look at another major global index, the FTSE Global All-Cap Index, found different results. Read more about about our comparison of the FTSE Global All-Cap Index vs MSCI ACWI Index.