The Vanguard FTSE Global All Cap and Vanguard FTSE Developed World ex-UK are popular index-tracking funds. These Vanguard funds provide investors with exposure to global equities. There are obvious differences between them but also some subtle ones you might not be aware of.
You may be aware that the Vanguard FTSE Developed World (ex UK) has a particularly strong historical performance. With the investing landscape changing fast, you might think you’ve missed the boat. Global markets are at a tipping point and you might wonder if the United States will continue to be the strongest of markets. For a full a complete comparison, we’ll also review the FTSE Developed World (including the UK).
Taking this into consideration is it time to double down on U.S. weighted funds or diversify by investing in the FTSE Global All Cap? In short:
- Will Developed markets continue to outperform?
- Will the United States continue to drive Developed Markets forward?
- What are the changes the United Kingdom underperform?
- Are Emerging Markets worth the risk?
Please note: this is not financial advice and you are responsible for your own investment decisions. When investing capital is at risk. This article may contain affiliate links.
Vanguard FTSE Developed World Ex UK Equity Index Fund Vs Vanguard Developed World Fund
The Vanguard FTSE Global All Cap is a fund that provides investors with exposure to companies in both developed and emerging markets worldwide. This fund tracks the FTSE Global All Cap Index, which includes more than 6,500 stocks from more than 47 countries. The index is market-cap weighted, meaning that larger companies have a greater impact on the index’s performance. The fund is suitable for investors seeking broad global equity exposure.
On the other hand, the Vanguard FTSE Developed World ex-UK fund tracks the FTSE Developed ex-UK Index, which includes large and mid-cap stocks from developed markets, excluding the United Kingdom. This fund is more focused on developed markets, particularly North America, Europe, and the Asia-Pacific region, and excludes emerging markets. This fund is suitable for investors who prefer exposure to developed markets and wish to exclude the UK from their investment portfolio.
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What Are The Key Differences For The Vanguard FTSE Developed World Ex UK Equity Index Fund
In essence, we want to analyse when would one fund be more suitable than the other. In order to do this I’ve reviewed the Morningstar fund comparison page to outline the key differences between all three fund options. This includes a comparison between the funds holdings and their ratings and performance.
- Inception date: Vanguard FTSE Dev Wld ex-UK Eq Idx £ Acc has been around since 2009, while Vanguard FTSE Dev World ETF USD Acc and Vanguard FTSE Glb All Cp Idx £ Acc were launched in 2019 and 2016, respectively.
- Morningstar Rating: Vanguard FTSE Dev Wld ex-UK Eq Idx £ Acc has a 5-star rating, while the other two funds have 4-star and 3-star ratings.
- Total Assets: Vanguard FTSE Dev Wld ex-UK Eq Idx £ Acc has the highest total assets at £12,246.44m, followed by Vanguard FTSE Glb All Cp Idx £ Acc at £2,288.91m and Vanguard FTSE Dev World ETF USD Acc at £2,266.37m.
- Ongoing Charge: Vanguard FTSE Dev World ETF USD Acc has the lowest ongoing charge at 0.12%, followed by Vanguard FTSE Dev Wld ex-UK Eq Idx £ Acc at 0.14% and Vanguard FTSE Glb All Cp Idx £ Acc at 0.24%.
- Performance: Over the last 3 years, the three funds have shown slightly different returns. Vanguard FTSE Dev Wld ex-UK Eq Idx £ Acc has returned 41.79%, Vanguard FTSE Dev World ETF USD Acc has returned 47.36%, and Vanguard FTSE Glb All Cp Idx £ Acc has returned 50.25%. However, it’s important to note that past performance is not indicative of future returns, and that these returns can be affected by a number of factors, including market conditions and the specific holdings of each fund.
Total Returns: Vanguard FTSE Developed World Vs FTSE Global All Cap
The data source data for this chart was taking from Morningstar and is correct as of 08/05/2023. It compares the Vanguard FTSE Developed World Index Fund vs The FTSE Global All Cap Vs The FTSE Developed World Fund (Inc UK). The chart shows the cumulative performance of each fund (where possible) for the past 3, 5 and 10 years . It is important to note that past performance is not a guarantee of future results. The future returns of emerging markets and developed markets are uncertain.
Vanguard FTSE Developed World Ex UK Equity Index Fund has performed slightly ahead of the Vanguard FTSE Global All Cap fund in the past 5 years. Over three years, there is only a marginal difference in performance between the Vanguard FTSE Developed World Ex UK and the FTSE Developed World Fund.
Asset Allocation: Vanguard FTSE Dev World ex-UK vs Vanguard FTSE Global All Cp
Both the Vanguard FTSE Global All Cap and the Vanguard FTSE Developed World ex-UK funds invest in equities. The do however have some differences in their asset allocation and risk level. Understanding these differences can help investors determine which fund may be more suitable for your personal preference.
The Vanguard FTSE Global All Cap fund has a more diverse asset allocation than the Vanguard FTSE Developed World ex-UK fund. The former includes both developed and emerging markets. Whereas the latter only includes developed markets excluding the UK. This means that the Global All Cap fund invests in a wider range of companies across different regions and sectors, which can provide greater diversification. However, the Developed World ex-UK fund may be more concentrated in certain regions and sectors, such as North America, Europe, and the Asia-Pacific region.
Emerging markets tend to be riskier than developed markets due to a number of factors. This include political instability, weaker economic infrastructure, and currency risk. As a result, the Vanguard FTSE Global All Cap fund may be considered riskier than the Vanguard FTSE Developed World ex-UK fund due to its exposure to emerging markets. However, both funds are broadly diversified and invest in large and mid-cap companies, which may help mitigate some of the risks associated with individual stocks.
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Vanguard FTSE Dev World ex-UK Vs Emerging Markets Allocation
Leading experts on Emerging Markets claim they are currently better valued that developed markets. As such there are a number of reasons why we may want to include Emerging Markets in our portfolio:
- Potential for higher returns: Emerging markets have historically exhibited higher economic growth rates than developed markets, which can lead to higher returns for investors. However, it’s important to note that this higher growth potential also comes with higher risks, including political instability, currency risk, and market volatility.
- Diversification: Including emerging markets in an investment portfolio can provide diversification benefits. Reducing concentration risk in any one region or country can mitigate the impact of market downturns. For example, economic shocks in a particular region.
- Exposure to new industries: Emerging markets are often associated with dynamic and rapidly growing sectors (e.g. technology). Including exposure to these sectors through investments in emerging markets can provide investors with access to new opportunities for growth and potential for higher returns.
Historical Performance: Emerging Markets Vs Developed Markets
It is also important to caveat that U.S. and international stocks have gone through cycles of relative outperformance. According to iShares the 2000s were strong for Emerging markets but this cycle was reversed for the 2010s.
Vanguard FTSE Dev Wld ex-UK vs The United Kingdom
There are many benefits to including the UK as a market in your portfolio. The UK has stable economy, relatively speaking. The UK is one of the largest and most developed economies in the world. It has a stable political system and a well-developed financial infrastructure, which can provide investors with a relatively stable investment environment.
Investing in the UK also offers high exposure to global industries. The UK is home to many large and well-established multinational companies that operate in a wide range of sectors, including finance, energy, and consumer goods. These companies have global operations and can provide investors with exposure to a diverse range of industries. The Vanguard FTSE Developed World ETF would be a leading option if you wanted to exclude Emerging markets but include the UK.
What Are The Benefits of Investing In the United Kingdom?
All of the above means there are some distinct benefits to investing in the United Kingdom. The FTSE 100 companies in particular have:
- Strong dividend payments: Many UK companies have a strong history of paying dividends. For example, the iShares UK Dividend Yield Fund (available on Lightyear), has provided a reliable source of passive income.
- Historical performance: UK equities have historically performed well over the long term. For example, the FTSE 100 Index has delivered an average annual return of around 7.5% over the past 30 years.
- Currency diversification: Including investments in the UK can provide currency diversification benefits, as the British pound is one of the major global currencies. This can help to reduce the impact of currency fluctuations on an investment portfolio.
It is important to note that past performance is not a guarantee of future results. The future returns of emerging markets and developed markets are uncertain
What Are The Reasons To Exclude The United Kingdom?
It’s important to note that including the UK in an investment portfolio may also come with some risks, such as concentration risk if an investor is heavily invested in a few large UK companies or exposure to Brexit-related uncertainty. Since the UK voted to leave the European Union in 2016, there has been considerable uncertainty about the future of the UK economy and its relationship with the rest of the world. This uncertainty can make it difficult to predict the future performance of UK equities. There are also a number of other risks.
- Concentration risk: The UK stock market is heavily dominated by a few large companies. Just the top 5 stocks account for 40% of the FTSE 100 (as of 14/05/2023). This concentration can lead to a lack of diversification in an investment portfolio, which can increase risk. For example, Oil & Gas stocks account for 14.5% of the FTSE 100. This includes BP (8.4%) and Royal Dutch Shell (6.8%).
- Overlap with other investments: Many global funds, including the Vanguard FTSE Global All Cap fund, already include exposure to UK equities. Investors who want to reduce concentration risk or avoid overlap may choose to exclude the UK from their investment portfolio.
Vanguard FTSE Global All Cap Vs Vanguard FTSE Developed World ex-UK
In terms of performance, the Vanguard FTSE Global All Cap may provide greater diversification due to its exposure to emerging markets. Markets which have historically had higher growth rates than developed markets. However, emerging markets can also be more volatile and may present greater risks. The Vanguard FTSE Developed World ex-UK, on the other hand, may be less volatile but may not offer the same level of diversification.
Investors may have different risk tolerances and investment objectives. An investor with a higher risk tolerance and a long-term investment horizon may prefer the Vanguard FTSE Global All Cap fund. This is due to its potential for higher returns in Emerging Markets. Conversely, an investor with a lower risk tolerance and a shorter investment horizon may prefer the Vanguard FTSE Developed World ex-UK fund. As this may offer more stable returns and lower risk.
In summary, both the Vanguard FTSE Global All Cap and the Vanguard FTSE Developed World ex-UK funds have different asset allocations and risk levels. This can make them more suitable for different types of investors with different preferences and investment objectives. It is important for investors to evaluate their own preferences and risk tolerance, and to consult with a financial advisor if necessary. This can help to determine which fund or combination of funds is most appropriate for their individual circumstances.
What Global Index Fund Is The Best?
It’s hard to know what the best investments for your future are and it can seem overwhelming to make an informed decision that will give your portfolio the maximum potential for success. Investments are risky, but you can’t afford to miss out on opportunities. This means balancing risk with growth potential.
Our hand selected portfolio lists give you the information you need to make the best decisions for your future. With our easy-to-understand fund guides, you can select a fund with confidence, so you don’t miss out on any potential gains or losses. Invest in your future with the best portfolio choice— see the8 Index Funds that make my shortlist.
This shortlist also contains funds that capture popular indexes like the S&P 500. This includes Global funds with extraordinary returns. Our shortlist contains some excellent “Fund of Funds” options. You can capture an index fund such as the Fidelity Index US Fund P Accumulation, whilst buying into REITS and Emerging Markets.
These low-cost index tracker funds offer incredible returns and you pay less in fees. You may also want to know how to directly track an index like the S&P 500. There are also some excellent alternatives to the S&P 500 and theFTSE Global All Cap Index.
When Investing Capital Is At Risk
