A global tracker is an efficient way to get an exposure to different geographies at lower cost.
In fact, some financial advisers consider that a global equity tracker as part of the global equity allocation provides consistent outperformance.
The MSCI World is the index that global trackers tend to use as a benchmark. Comprising 23 developed markets, the USA is the largest constituent of this index, followed by Japan and the UK In terms of country weights.
Information technology is the largest sector in the index, with the US tech giants Apple, Microsoft, NVIDIA, Alphabet and Meta being the top constituents.
Source: MSCI
Over five years, £1,000 directly invested in the MSCI World would have returned £1,561.98 or a gain of 56.2%. This is a better result than the average IA Global fund, which is up 41% over the same period.
Yet, HSBC MSCI World UCITS ETF, iShares Core MSCI World UCITS ETF and Xtrackers MSCI World UCITS ETF would have done better, returning respectively 2.1, 0.6 and 0.5 percentage points more than the benchmark.
Source: FE Analytics
The fund that has deviated the most from the MSCI World over five years is Fidelity Index World, with a tracking error of 4.1%.
The other way around, Vanguard Global Stock Index and Lyxor Core MSCI World (DR) UCITS ETF had the lowest tracking error at 0.09%. The latter fund is also the cheapest in the list with an ongoing charge figure of 0.09%.
With an OCF of 0.5%, iShares MSCI World UCITS ETF GBP is the most expensive global tracker. It is also the tracker that would have returned the least in the list, giving back £17.31 less than the MSCI World to investors.