VWCE vs IWDA: Should You Include Emerging Markets in Your Global ETF?

VWCE vs IWDA: compare ISINs, TERs, and decide whether to include emerging markets in your global ETF to optimize your portfolio.

Introduction: VWCE vs IWDA, a Key Choice for Your Global Allocation

Investing globally through an ETF is a common strategy to diversify your portfolio. Two major benchmarks dominate the "world" segment: VWCE from Vanguard, which tracks the FTSE All-World index (including developed and emerging markets), and IWDA from iShares, based on the MSCI World (developed markets only). The debate "should you include emerging markets in your global ETF?" is recurrent among French investors, especially those investing via a standard brokerage account (CTO), since neither VWCE nor IWDA are eligible for the PEA.

In this article, we analyze the fundamental differences, composition, historical performance, fees, as well as academic and practical arguments to help you choose between these two flagship ETFs.

Fundamental Differences: Coverage Universe and Number of Holdings

VWCE (ISIN IE00BK5BQT80) is physically replicated and tracks the FTSE All-World index. This index includes approximately 3,700 securities listed across developed and emerging markets (about 90% developed, 10% emerging). The FTSE All-World covers roughly 98% of the investable global market capitalization.

Conversely, IWDA (ISIN IE00B4L5Y983), also physically replicated and domiciled in Ireland, tracks the MSCI World, which includes only developed markets, representing about 1,600 securities. It therefore completely excludes emerging markets.

ETF	Index	Number of Holdings	Markets Included	TER	domicile	Replication
VWCE (Vanguard)	FTSE All-World	~3,700	Developed + Emerging	0.22%	Ireland	Physical
IWDA (iShares)	MSCI World	~1,600	Developed only	0.20%	Ireland	Physical

Weight of Emerging Markets in VWCE: Significant Geographic Diversification

The weight of emerging markets in VWCE is approximately 10%. This segment is dominated by China (~3%), India (~2%), Taiwan (~2%), followed by other countries such as Brazil, South Korea, South Africa, and Russia with smaller weights.

This exposure allows VWCE to offer additional diversification compared to IWDA, which is concentrated on major developed economies like the United States (about 65% of the MSCI World), Japan, the United Kingdom, and Europe.

Comparative Performance Over 5 and 10 Years: IWDA Leads Over the 2010-2020 Decade

Over the 2010-2020 period, IWDA outperformed VWCE. The main explanation is the strong performance of developed markets, notably the United States, while emerging markets faced challenges, especially China with its economic slowdown, and some emerging countries in crisis.

Here are the approximate annualized returns (net dividends reinvested, Morningstar data as of 12/31/2020):

VWCE vs IWDA: Should You Include Emerging Markets in Your Global ETF?

Introduction: VWCE vs IWDA, a Key Choice for Your Global Allocation

Fundamental Differences: Coverage Universe and Number of Holdings

Weight of Emerging Markets in VWCE: Significant Geographic Diversification

Comparative Performance Over 5 and 10 Years: IWDA Leads Over the 2010-2020 Decade

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