ETF essentials · 2 minute read

Global ETFs explained: do they cover the whole world?

The short answer

Not always. A global ETF may cover developed markets only, developed and emerging markets, or a narrower selection of countries. Check the index or investment strategy rather than relying on the word “global”.

Why it matters

Global ETFs are often used to obtain broad exposure through one fund. But different global indices can include different markets and numbers of companies.

A global ETF may:

• Include developed markets but exclude emerging markets
• Include both developed and emerging markets
• Focus only on large and medium-sized companies
• Include smaller companies as well
• Exclude companies using sustainability or other screens

Global ETFs are also usually weighted by company size. This means the largest markets and companies receive the largest weights. A global fund can therefore have a substantial allocation to the United States and to a relatively small number of very large companies.

A simple example

One global ETF follows an index containing developed-market companies. Another follows an all-country index that also includes China, India, Taiwan and other emerging markets.

Both may be described as global, but the countries they invest in, number of holdings and risk can differ.

What to check

• Which index does the ETF follow?
• Are emerging markets included?
• Are small companies included?
• Which countries have the largest weights?
• How concentrated are the ten largest holdings?
• Does the ETF apply exclusions or screens?

Key term explained

A developed market is generally a large, established market with mature financial systems. An emerging market is a market that is still developing and may carry additional political, currency, liquidity or governance risks.

“Global” is a useful starting label, not a complete description of what an ETF owns.