Vanguard FTSE Global All Cap Index: May 2025 update

• Vanguard is a pioneer of passive investing

• This fund invests in a broad range of countries all over the world

• It’s tracked the FTSE Global All Cap Index closely since launch

• This fund doesn’t feature on our Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

The Vanguard FTSE Global All Cap Index fund invests in company shares of all sizes across developed and emerging markets. Emerging markets offer investors greater potential for growth, but they can be subject to more price volatility and are higher risk than their more developed counterparts.

This fund provides broad exposure to global markets and could be a simple low-cost way to form the shares portion of an investment portfolio aiming to deliver long-term growth. It could also help diversify a portfolio focused on other investments such as bonds.

Manager

Vanguard is a pioneer when it comes to passive investing, having created the first retail index fund over 45 years ago. It now runs some of the largest index funds in the world. Given its size, it has a big investment team with the expertise and resources to help its funds track indices and markets as closely as possible, while having scale to keep costs down.

Vanguard funds are run by a large, global team. They’re spread across three investment hubs around the world – the US, UK and Australia. This team-based approach means there’s no named manager on the fund. As a collective team, Vanguard has run this fund for nearly 9 years.

Vanguard also has a trading analytics team, which is responsible for ensuring the funds buy and sell investments efficiently and at a competitive cost. This involves analysing data from different brokers and banks. Lower costs should help the funds track their benchmarks as closely as possible.

Process

This fund aims to track the performance of the FTSE Global All Cap Index, which includes around 10,000 companies. The fund currently invests in just under three quarters of the number of companies in the benchmark. This is known as partial replication and helps keep performance tight to the index while keeping costs low.

The fund currently invests 25.4% in the technology sector. This is partly driven from the large amount (61.9%) invested in the US market where there are household names like Apple and Microsoft. The next largest sectors are financials and consumer discretionary, which made up 16.1% and 13.9% of the fund respectively at the end of April. This fund also invests in smaller companies which are higher risk than their larger counterparts.

Reducing costs is a key part of keeping the tracking difference between the fund and the benchmark to a minimum. In any tracker fund, factors like taxes, dealing commissions and spreads, and the cost of running the fund all drag on performance. To help keep these costs down, the team aims to make large investments in companies instead of lots of small transactions.

Vanguard will also lend some of the investments in the fund to other providers in exchange for a fee, which can be used to offset some of the costs. It will only lend securities to a limited number of high-quality approved dealers. Vanguard indemnifies the fund against any loss from this process, meaning there should be no negative impact on investors. However, stock lending adds risk.

Culture

Vanguard is currently the second largest asset manager in the world and runs around $10trn of assets globally as of March 2025. The group aims to put the client at the forefront of everything it does, which drives its focus on quality, low-cost index products.

John Bogle founded Vanguard in 1975, and it’s owned by investors. This allows Vanguard to redirect its profits back to investors in the form of lower fees, instead of paying dividends to external shareholders. Bogle believed in creating products that simply track the performance of a market rather than taking a shot at picking individual companies which may beat them.

The team running this fund works closely with other equity research and risk departments across the business. They have daily and weekly meetings to discuss ongoing strategy which could add good support and challenge on how to run the fund effectively.

ESG Integration

Vanguard is predominantly a passive fund house. While it’s offered exclusions-based passive funds for many years, it’s lagged peers in offering passive funds that explicitly integrate Environmental, Social and Governance (ESG) criteria by tracking indices that tilt towards companies with positive ESG characteristics, and away from those that don’t.

Vanguard’s Investment Stewardship team carries out most of the firm’s voting and engagement activity. Its stewardship activity is grounded in the firm’s four principles of good governance: board composition and effectiveness, board oversight of strategy and risk, executive pay and shareholder rights.

The Investment Stewardship team produces frequent insights on their engagement activity at both a corporate and governmental level. Investors can also access fund-by-fund proxy voting records, although voting rationales are not provided. That said, voting and engagement case studies can be found in the firm’s annual Investment Stewardship report and quarterly Engagement and Voting reports.

Vanguard courted controversy in 2022 when it left the Net Zero Asset Managers’ Initiative, a group of asset managers that have committed to achieving net zero carbon emissions by 2050. It claimed its decision would improve clarity for investors and allow it to speak independently. We view this as a disappointing backward step. Furthermore, in 2024 it was reported that Vanguard failed to support a single shareholder proposal requiring more action from investee companies on environmental and social matters.

The Vanguard FTSE Global All Cap Index fund tracks an index that doesn’t specifically integrate ESG considerations into its process. The fund can therefore invest in shares issued by companies in any sector in line with the benchmark.

Cost

The fund has an ongoing annual fund charge of 0.23%. Our platform charge of up to 0.45% per annum also applies, except in the HL Junior ISA, where no platform fee applies.

Performance

Since launch in November 2016, this fund has done a good job of tracking the performance of the FTSE Global All Cap Index, gaining 112.00%* versus 121.78% for the index. As expected of tracker funds, it’s behind the benchmark over the long term because of the costs involved. However, the tools used by the managers have helped to keep performance close to the index. Remember, past performance isn’t a guide to future returns.

The global stock market benefited from the strong performance of the US market in 2024. The magnificent seven companies (Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, and Tesla) dominated stock market returns last year due to advancements in Artificial Intelligence (AI).

The US hasn’t performed as well as most other major markets so far in 2025. This follows concerns that Trump’s proposed policies, especially on tariffs, could cause inflation to rise again.

Despite weak economic data and recessionary risks, Germany’s stock market was one of the best performing markets over the past 12 months. Some of the larger companies carry out business globally and aren’t as reliant on the strength of the German economy. Technology companies have benefitted from the AI boom, and SAP, one of Germany’s leading tech companies, was a key driver of performance.

On the other hand, South Korea was one of the worst performing global markets. Sentiment has weakened in Korea as there’s been a lot of political uncertainty and concerns over growth.

Given Vanguard’s size, experience and expertise running index tracker funds, we expect the fund to continue to track the index closely in the future, though there are no guarantees.