MSCI World

The MSCI World index is calculated by the index provider MSCI. It includes large and mid-sized companies from the countries MSCI classifies as developed markets, around two dozen in total, including the US, Canada, much of Western Europe, Japan and Australia. Within each country it aims to cover about 85% of the free-float market capitalisation, and each company is weighted by that free-float value. The index is reviewed regularly, with companies added or removed as they grow, shrink or change status, and countries can be reclassified between developed and emerging.

Despite its name, MSCI World does not cover the whole world. It excludes emerging markets such as China, India and Brazil, which are covered by separate MSCI indices; a broader family combining both is called MSCI ACWI, the all country world index. It also leaves out small companies. Because it is weighted by market value, the US makes up by far the largest share, so a fund tracking MSCI World is heavily exposed to US companies and the dollar. It is a common core holding for European investors seeking broad diversification in a single fund.