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

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

In the quest for global exposure via ETFs, two major options dominate the European market: the Vanguard FTSE All-World UCITS ETF (VWCE) and the iShares Core MSCI World UCITS ETF (IWDA). The main difference between these two funds lies in their investment universe. VWCE includes about 10% emerging market equities, while IWDA focuses exclusively on developed markets. This distinction raises the crucial question: should emerging markets be included in your global ETF allocation? This article offers an in-depth comparative analysis of the performance, characteristics, and outlook of these two ETFs to help French investors make an informed decision.

Overview of VWCE and IWDA ETFs

Comparative Performance Over 5 and 10 Years

For a rigorous analysis, we compared the average annual total return (dividends reinvested) of both ETFs over the periods 2014-2024 (10 years) and 2019-2024 (5 years), in euros, excluding brokerage fees.

Over the past decade, IWDA slightly outperformed VWCE, with a 0.3% annual advantage. This outperformance is explained by the prolonged underperformance of emerging markets, notably China, during this period. Conversely, over the last 5 years, VWCE took the lead, thanks to strong emerging market performance, primarily India and certain Asian markets.

Impact of Emerging Markets: India vs China

The weight of emerging markets in VWCE is about 10%, with significant allocations to China (around 3-4%) and India (around 2-3%). These two markets have experienced very different trajectories: