Understanding Global Index Funds: FTSE vs MSCI Explained

Global index funds are one of the simplest ways to get exposure to a wide range of companies from around the world. These funds aim to track a global index — which is just a list of companies chosen based on certain criteria — and mirror its performance.

If you’ve ever looked into global index funds, you’ve probably seen two names come up a lot: FTSE and MSCI. But what do they actually mean? And how are they different?

Let’s break it down.

---

What Is a Global Index Fund?

A global index fund is a type of investment fund that tries to match the performance of a global stock market index. That index might include thousands of companies across developed and emerging markets — think big names from the US, UK, Japan, Europe, and beyond.

The idea is simple: instead of picking individual stocks, the fund spreads your money across a huge number of companies, following the exact proportions of a chosen index.

---

What Are FTSE and MSCI?

Both FTSE and MSCI are companies that build and manage these indexes.

• FTSE (pronounced “Footsie”) stands for Financial Times Stock Exchange. It’s owned by the London Stock Exchange Group.
• MSCI stands for Morgan Stanley Capital International. It’s a US-based financial company.

Each of these companies creates indexes that cover global markets, but they do so slightly differently.

---

Key Differences Between FTSE and MSCI Indexes

While both companies offer similar global indexes, like FTSE All-World and MSCI ACWI (All Country World Index), there are a few subtle differences.

Feature	FTSE	MSCI
Headquarters	UK (London Stock Exchange)	US (Morgan Stanley)
Developed vs Emerging Market Classification	FTSE classifies South Korea as a developed market	MSCI classifies South Korea as an emerging market
Index Example	FTSE All-World Index	MSCI ACWI Index
Number of Companies	Slightly more in FTSE All-World	Slightly fewer in MSCI ACWI
Market Coverage	~90–95% of investable global market	~85–90% of investable global market

These differences are not usually dramatic, but they can lead to slight variations in performance and country weightings between funds that track each index.

---

Why Do These Differences Matter?

Imagine two global funds — one tracking the FTSE All-World and another tracking MSCI ACWI. Both might own companies like Apple, Nestlé, Toyota, and Unilever. But:

• The FTSE version might have slightly more companies overall.
• The MSCI version might weigh certain countries differently, especially ones like South Korea.
• Over time, performance might differ slightly based on how the indexes are constructed.

That said, both are widely used, well-established, and aim to represent the global economy.

---

In Summary

• Global index funds spread investments across a wide range of international companies.
• FTSE and MSCI are two of the biggest index providers.
• While both aim to represent the global market, they differ slightly in country classification, number of stocks, and methodology.
• These differences can affect how a global index fund behaves, even if the fund names seem very similar.

Understanding these basics can help you make sense of what’s under the hood when you see a fund labeled “FTSE Global All Cap” or “MSCI World Index.”

This article is for informational purposes only and does not contain financial advice.