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Regular readers will know I am a big fan of index tracking, which delivers reliable long-term exposure to asset classes without all the hassle of worrying whether active managers with good records are lucky, about to quit, or get run over by a bus.

But there are times when indices get distorted. It happened during the dot.com boom when the likes of Baltimore Technologies and Freeserve got catapulted into the FTSE100 index and when Nokia was more than half the value of the whole Finnish market. At extremes, index-tracking does push investors into buying overvalued stocks.

Is this one of those times? Credit Suisse Asset Management recently warned that, following the latest index changes, the FTSE100 contained no fewer than 10 mining companies and seven oil and gas groups. Indeed, seven of the largest 10 companies are from the two commodity-related sectors.

Even before the changes, the two sectors made up around a third of the index by value. However, neither of them was the biggest sector. That honour belonged to the financial sector, with around a quarter of the market capitalisation. That means index trackers are effectively forced participants in the banking sector’s latest wave of rights issues.

Is there a way of getting round this problem? Not entirely, since the commodities boom is a global phenomenon while the financial sector has grown enormously in importance over the last 25 years.

But you can get round the problem by opting for a global index, rather than the parochial FTSE100. As of 31 March, the MSCI World index had lower weightings in financials, energy and basic materials than the FTSE100. Grouping them together, an MSCI World portfolio would have a 41 per cent exposure to the three sectors, rather than the 57 per cent plus exposure of the British index.

And the MSCI world index gets you exposure to a broader range of industries. Technology’s weighting in the FTSE is a pathetic 0.2 per cent; in the MSCI World, it is 10.2 per cent. industrials are 11 per cent of the MSCI and just 3.5 per cent of FTSE. Weightings in utilities and healthcare are roughly equivalent.

There’s also a lot more diversification in terms of corporate risk. If things go wrong at either BP or Royal Dutch, the FTSE100 suffers; the two together are worth 17.5 per cent of the index. But the two biggest stocks in the MSCI – Exxon Mobil and General Electric – are worth not much more than 3 per cent of the index between them. The top 10 stocks are worth around half of the FTSE100, according to Credit Suisse; they are worth just 9.6 per cent of the MSCI World.

An investment in the global index also gives the investor diversified exposure to political risk – the danger that a government will mess things up. Given the recent record of Gordon Brown and Alistair Darling, this seems like a good thing to me. The biggest exposure is to the US (47 per cent of the index) but one also gets a decent weighting in Japan, France, Germany, Canada, Switzerland and Australia – all of which are more than 3 per cent of the index.

Although it is possible to buy the index in sterling form, through the iShares exchange traded fund, there is an implied foreign currency exposure. But with the pound still looking overvalued relative to the dollar, that does not seem such a bad thing. And there is a yield on the fund, although at 1.8 per cent, it is admittedly lower than the 3.4 per cent available from the FTSE100.

The answer to the problem of a distorted index, therefore, need not necessarily be to pay the higher fees associated with active management. It can be to find a better index. And the MSCI World looks a better index than the FTSE at the moment.