Around the world in ETFs: different plays for the US and going global

It’s a humbling figure for the average stock picker, but just 30 active funds from the fund and investment trust Global sectors (comprising 277 in total) have beaten the MSCI World index (in sterling terms) over the decade to 4 November 2025.

This explains why many investors continue to use global tracker funds as the core of their portfolio. Exchange-traded funds (ETFs) tracking indices such as the FTSE All-World and MSCI World were among the top purchases for ii customers in October, extending a long trend.

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The rich returns made by such funds, and the shortcomings of active portfolios, are well discussed. But it’s important to remember the big bets both global and US tracker funds are taking, and the risks this can invite.

The second part of our “Around the world in ETFs” series discusses what this means for your portfolio and how newer ETFs are taking a different path.

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A glorified US equity fund?

In October, three conventional “global” ETF options were among the bestsellers among ii customers in the form of the Vanguard FTSE All-World UCITS ETF GBP (LSE:VWRL), that same fund’s income share class, and the iShares Core MSCI World ETF USD Acc GBP (LSE:SWDA).

Elsewhere, some of Vanguard’s LifeStrategy portfolios, which have less of a US bias and a decent allocation to the UK, are among the most-popular funds. LifeStrategy is also available in an ETF format.

If we include Vanguard LifeStrategy 100% Equity A Acc in the mix, all three approaches have provided great returns over the long run, as the table shows. But as many have noted, the FTSE All-World and MSCI World funds are a lot less global than some might assume.

Source: FE Analytics on 4/11/2025. Past performance is not a guide to future performance.

To start with the worst culprit, the MSCI World ETF had a whopping 72.5% of its portfolio in US shares on 3 November 2025. The next biggest country allocation, to Japan, accounted for just 5.5%, with the UK making up 3.6%.

While the MSCI World and FTSE World indices only focus on developed markets, their “All-World” equivalents diversify marginally further via small allocations to certain emerging markets.

But this is still a US-heavy approach: the Vanguard FTSE All-World ETF had around two-thirds of its portfolio in North America at the end of September (the last point to which it has disclosed data). China, the best represented emerging market in the fund, sat on a mere 3.7% weighting.

Dividend-focused strategies are another option for those looking for diversification alongside the growth-heavy S&P 500 index. Among the options is Vanguard FTSE AllWld HiDivYld ETF $Dis GBP (LSE:VHYL). It owns companies with dividend yields that are higher than the global average. This means it buys cheaper shares than a classic global tracker and yields more, at 2.9%. Its US exposure is lighter, at 41%.

The solutions?

Talking heads have spent much of the last decade discussing whether US equities are too reliant on a handful of mega-cap stocks, from the old “FAANG” cohort to the more recent Magnificent Seven. Concerns about this, and whether US shares are in fact too expensive, have given anyone using a global tracker plenty to think about.

Betting against the US has not tended to pay off that consistently over this period, even if there have been sporadic moments of vindication. But investors do have ways to diversify beyond a global tracker, or to take a more nuanced approach, if they so wish.

The options are numerous. We mentioned LifeStrategy, whose 100% Equity fund has around half its portfolio in North America and a quarter of its assets in UK shares, with smaller allocations to Europe, the emerging markets and Japan.

As our first table shows, the fund has held its own against more US-focused funds over the years – and interestingly the three funds haven’t performed hugely differently, year by year.

Over a 10-year stretch to 4 November 2025, the MSCI World ETF has returned around 258%. The FTSE All-World fund is on around 237%, with Vanguard LifeStrategy 100% Equity on a respectable 205.8%.

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Investors can manage their US exposure in other ways, too. There’s the option to pair an MSCI World tracker with an active global fund that has less exposure to the US, or a value investing approach. Many options are out there but one all-weather global trust, Brunner Ord (LSE:BUT), tends to have a structural underweight to the US, while names such as Schroder Global Recovery Z Acc take a value approach.

Brunner manager Julian Bishop recently appeared on our On The Money Podcast, to discuss US tariffs and artificial intelligence (AI).

Those who want to go granular using just ETFs could pair an S&P 500 tracker with a product such as the iShares MSCI World ex-USA ETF USD Acc GBP (LSE:XUSE), setting the allocations to their own taste.

But they should remember that excluding one major market constituent will inevitably beef up the remaining allocations. Our table shows what sort of exposures the fund offers.

Source: iShares, 3/11/2025.

Another option is to use an equal weight fund such as Invesco MSCI World Eql Wght ETF Acc USD (LSE:MWEQ). As the name suggests, this fund gives a roughly equal weighting to each constituent of the index, meaning relatively little is riding on the performance of the Magnificent Seven.

One of the main benefits is that an equal-weighted ETF avoids being overexposed to stocks that have become overvalued or, worse still, potentially part of a bubble.

However, this approach has its critics, with some arguing that an equal weight ETF would still struggle in a general sell-off but miss out on substantial gains when the biggest stocks are doing well.

Our table shows how the MSCI World index and its equal weight equivalent have fared. The former is quite clearly ahead over a 10-year stretch, showing the risk, at least for the time being, of betting against the market leaders.

Source: FE Analytics, 4/11/2025. Past performance is not a guide to future performance.

The American way

If the dominance of a few stocks is an issue for global equity ETFs, it obviously becomes much greater for the humble S&P 500 tracker.

The Vanguard S&P 500 UCITS ETF GBP (LSE:VUSA), whose two share classes occupied a spot each in the October ETFs bestsellers’ list, has around a third of its portfolio in the Magnificent Seven. Other AI plays are well represented too, with chipmaker Broadcom Inc (NASDAQ:AVGO) among the top positions.

As with global ETFs, such considerations have prompted new products to materialise. Some are even doubling down on the market’s biggest constituents.

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There’s the iShares S&P 500 Top 20 ETF USD Acc GBP (LSE:SP20), which has around 17% in NVIDIA Corp (NASDAQ:NVDA) and more than 13% apiece in Microsoft Corp (NASDAQ:MSFT) and Apple Inc (NASDAQ:AAPL). There’s also the L&G S&P 100 ETF and the Amundi MSCI USA Mega Cap ETF USD Acc GBP (LSE:MEGA).

Those who see concentration as a risk have choices, too. There’s the Amundi MSCI USA ex Mega Cap ETF, and in common with global funds there are equal weight S&P 500 trackers, including Invesco S&P 500 Equal Weight ETF Acc GBP (LSE:SPEX), Xtrackers S&P 500 EW ETF 1C GBP (LSE:XDWE) and UBS S&P 500 Equal Weight SF ETF USD acc GBP (LSE:S5EQ). For other options on how to cast nets wider and reduce US concentration risk, read our previous feature on the subject.

But for now, concentration is king when it comes to performance.

To give one example, the S&P 100 index leads over the 12 months to 4 November 2025 with a sterling total return of 24.2%, versus 17.9% for the S&P 500. The S&P 100 is also massively ahead over 10 years, but it remains a bold play.

The old ways

Some old favourites offer a different form of US exposure.

One example is the Dow Jones Industrial Average index, focused on 30 big names in the industrials space.

With so few holdings it’s another concentrated approach: the iShares Dow Jones Indust Avg ETF USD Acc USD (LSE:CIND) has roughly 10% of its portfolio in The Goldman Sachs Group Inc (NYSE:GS), with 7.4% in Caterpillar Inc (NYSE:CAT), 6.7% in Microsoft, 4.9% in The Home Depot Inc (NYSE:HD) and 4.7% in American Express Co (NYSE:AXP).

This index has not done so badly, making a 13.4% return over 12 months and roughly 80% over five years. It lags the S&P 500 on this front, but its exposure to the US economy and consumer might appeal to some.

Most major indices, including the S&P 500, use market-cap weightings, which rank companies by their size. However, the Dow Jones uses a price-weighting methodology. With this approach, company size is not taken into account. Instead, it simply tracks the stocks with the highest share prices that have the biggest influence on the performance of the index.

Its price-weighting methodology and concentrated approach can prove off-putting for some investors.

It’s finally worth remembering the tech-heavy Nasdaq Composite index, which has done very big numbers over the years but certainly leans into backing today’s market leaders.

The Nasdaq Composite has returned almost 500% over 10 years. The more concentrated Nasdaq 100 has done around 600% over that period, which might explain the popularity of the Invesco EQQQ NASDAQ-100 ETF GBP (LSE:EQQQ) among ii customers.