MSCI World ETFs: everything you need to know

MSCI World ETFs track the MSCI World Index, which is essentially a list of around 1,500 stocks from 23 developed countries such as the USA, Germany, Japan, and Australia. It focuses on large‑ and mid‑cap, established companies like Apple, Nestlé, Microsoft, or Toyota. This index covers around 85% of the free float-adjusted market capitalisation in each country.

An ETF (Exchange Traded Fund) is a fund traded on the stock exchange that  bundles a selection of stocks into a single investment product. When you invest in an MSCI World ETF, you gain exposure to a broad set of companies across many countries and industries, without needing to buy individual shares.

What does MSCI stand for?

MSCI stands for “Morgan Stanley Capital International.” Sounds complex at first, but it’s simple: MSCI is a company that creates stock indices. These indices show how specific groups of stocks are performing.

The “World” index by MSCI includes stocks from 23 developed nations, such as the USA, Japan, Germany, or Australia. As such, it’s considered a benchmark for global equity investments.

MSCI also offers many other indices, for example, for sustainable or European stocks. At Peaks, you can also invest with MSCI Pacific SRI ETF (25% most sustainable stocks from Asia and Australia), MSCI Europe SRI ETF (25% most sustainable stocks in Europe), MSCI USA SRI (25% most sustainable stocks in USA), MSCI Emerging Markets SRI ETF (25% most sustainable emerging market stocks), MSCI World Small Cap Socially Responsible ETF (sustainable small and medium sized enterprises across the world).

Which companies are in the MSCI World Index?

The MSCI World Index includes some of the world’s most recognised companies: Apple, Microsoft, Amazon, Nestlé, Johnson & Johnson, or Toyota.

The U.S. makes up more than 70% of the index. This is because many of the largest publicly traded companies are based in the U.S.

The companies in the index come from a range of sectors:

• Technology
  
  
• Finance
  
  
• Healthcare
  
  
• Industry
  
  

This wide distribution across many sectors is known as diversification — and it helps reduce risk.

How have MSCI World ETFs performed?

Over the past years, the index has shown long-term growth — even though there were temporary downturns. Stock markets fluctuate, but over several years, values tend to rise.

Please note: Past performance is not a guarantee of future results. Investing always involves risk and you can lose (part of) your invested money. 

How does an ETF tracking the MSCI World Index work behind the scenes?

There are different ways an ETF can follow the MSCI World Index. Which one applies depends on the provider:

• Full replication: Some ETFs buy all the stocks in the index. If Apple is in the index, the ETF actually owns Apple shares. This is called physical or full replication.
  
  
• Sampling: Others buy a selection of stocks from the index (instead of all), aiming to closely match the overall performance.
  
  
• Synthetic replication: A few ETFs use contracts with banks to copy the index’s performance, without directly owning the shares.
  
  

Each method has pros and cons in terms of costs, tracking accuracy, and transparency. Among the more than 20 MSCI World ETFs listed on JustETF, you’ll find a mix of these approaches.

Is the MSCI World Index updated regularly?

Yes. MSCI reviews the index several times a year to determine which companies should be added or removed. The ETF adjusts automatically to these changes.

Which MSCI World ETF is right for you?

There are around 22 ETFs that track the MSCI World Index. While they all track companies within the same index, each ETF has been tweaked with a different focus, which means their performances all vary. You can find up-to-date performance data for all indices and specific ETFs online. 

The best ETF is the one that fits your investment goals. You might want to invest in the biggest, most well-known companies out there. Or maybe you'd rather support smaller businesses that still have room to grow. For some, keeping fees low is the top priority. For others, it’s more important to make sure their money supports companies that are doing good for people and the planet.

Support small, sustainable businesses within the MSCI World Index

As we mentioned, Peaks offers UBS MSCI World Small Cap Socially Responsible ETF, which specifically tracks the MSCI World Small Cap SRI Low Carbon Select 5% Issuer Capped index, which only includes small cap companies from developed markets across the world. Additionally, its selection is restricted to companies with high Environmental, Social and Governance (ESG) ratings. 

Here’s what else you should know:

• It invests in about 740 smaller, mid-sized companies. These firms are often more nimble and can grow faster than the large corporations you’re probably already familiar with.
  
  
• No single company makes up more than 5% of the fund. This means your investment isn’t too affected if one company has a bad year.
  
  
• The fund actually owns all the stocks it tracks (that’s called “physical replication”), meaning your money goes into real shares.
  
  
• Profits from dividends are reinvested into the fund.
• Annual fee is about 0.23%, it manages roughly €435 million, and was launched in August 2021.
  
  

The UBS MSCI World Small Cap Socially Responsible ETF is ideal for investors looking to support smaller companies, care about ethical and sustainable investing. It avoids controversial industries and offers broad diversification. However, it is important to remember that small-to-mid cap stocks can be more volatile, and that sustainability screening narrows the investment options. This may affect your returns compared to broader funds.