How ETFs Select and Track Their Index
VTI tracks CRSP. VOO tracks S&P. VXUS tracks FTSE. Here is what these index providers are and why the choice matters.
Don't have time? Here's what you need to know:
- 1ETFs track indices from S&P, CRSP, FTSE, or MSCI — each with different selection rules
- 2The biggest practical difference: FTSE puts South Korea in developed markets; MSCI puts it in emerging
- 3Index choice matters less than expense ratio for core holdings — performance differences are under 0.1%
- 4Vanguard uses CRSP and FTSE to keep licensing costs (and your expense ratios) low
The Four Major Index Providers
ETFs do not pick stocks themselves — they follow an index created by a third-party provider. The four biggest: S&P Dow Jones (S&P 500, S&P MidCap 400), CRSP (Center for Research in Security Prices — used by Vanguard for VTI, VO, VB), MSCI (MSCI World, MSCI Emerging Markets — used by most iShares international ETFs), and FTSE Russell (FTSE All-World, Russell 2000 — used by Vanguard for VXUS, VWO).
Each provider has different rules for which stocks to include, how to weight them, and when to rebalance. The S&P 500 uses a committee that selects stocks based on profitability and market cap. The CRSP Total Market Index uses purely quantitative rules. These methodology differences create small but measurable performance variations.
How Index Choice Affects Your ETF
The most impactful difference: FTSE classifies South Korea as a developed market while MSCI classifies it as emerging. This means VXUS (FTSE) has less South Korea exposure than IXUS (MSCI) because South Korea appears in the developed portion of FTSE indices. Performance impact: minimal, but worth knowing.
| Index | Used By | Key Feature | Example |
|---|---|---|---|
| S&P 500 | VOO, IVV, SPY | Committee-selected 500 large-caps with profitability screen | Excludes unprofitable large companies |
| CRSP U.S. Total Market | VTI | Rules-based, broadest U.S. coverage (4,000+ stocks) | Includes micro-caps that S&P excludes |
| FTSE All-World | VXUS, VT | Classifies South Korea as developed market | Slightly different country allocation than MSCI |
| MSCI World | IXUS (via MSCI ACWI ex-US) | Classifies South Korea as emerging market | Different from FTSE for international funds |
| Russell 2000 | IWM | Broadest small-cap index (includes unprofitable companies) | Lower quality screen than S&P SmallCap 600 |
Does Index Choice Really Matter?
For core holdings, the differences are small. VTI (CRSP) and ITOT (S&P Total Market) return within 0.1% of each other annually. VOO (S&P 500) and VV (CRSP Large-Cap) are nearly identical. The index provider matters more for international and small-cap ETFs where methodology differences in country classification and profitability screens create more variation.
Pick the ETF with the lowest expense ratio for your target exposure and do not worry about the underlying index provider. The cost difference (0.03% vs 0.07%) has more impact than the index difference (CRSP vs S&P).
Tip: If you care about South Korea classification: VXUS (FTSE, South Korea in developed) vs IXUS (MSCI, South Korea in emerging). This affects about 3-4% of the international fund's country allocation.
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Frequently Asked Questions
Why does Vanguard use CRSP and FTSE instead of S&P?
Licensing costs. S&P charges higher index licensing fees than CRSP and FTSE. Vanguard switched from MSCI to FTSE for international funds in 2012 to reduce costs — savings that get passed to investors through lower expense ratios.
Is the S&P 500 better than the CRSP Total Market Index?
Neither is better — they serve different purposes. The S&P 500 holds 500 large-caps with a profitability screen. CRSP Total Market holds 4,000+ stocks of all sizes. S&P is more concentrated; CRSP is broader. Performance is nearly identical because large-caps dominate both.
Does the Russell 2000 or S&P SmallCap 600 produce better returns?
The S&P SmallCap 600 has historically outperformed the Russell 2000 by about 1-2% per year because it screens for profitability — excluding money-losing companies. IJR (S&P 600) has beaten IWM (Russell 2000) over most time periods.
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Alex Harrington
CFA Level II Candidate, Finance & Economics
Alex Harrington is an independent ETF researcher and personal finance writer with over 8 years of experience analyzing exchange-traded funds. A CFA Level II candidate with a background in economics, Alex has reviewed 800+ ETFs and helped thousands of beginners build their first investment portfolios through clear, jargon-free education.
This content is for educational purposes only and does not constitute financial advice. Past performance does not guarantee future results. Consult a licensed financial advisor before making investment decisions.