Recent data has shed light on a significant trend among British investors that I believe warrants our attention. Since 2015, UK investors have injected a whopping £50 billion into global equity funds, moving away from UK-only investment funds. This shift is accelerating, showing the increasing appeal of a global investment approach.
Why is this happening?
There is growing frustration among investors with the subpar performance of UK stocks. Many are turning to global active managers who are agile enough to shift focus towards higher growth areas—like US large-cap tech stocks such as Alphabet and Microsoft.
The Global Advantage
As Calastone’s head of global markets, Edward Glyn, eloquently put it: “Global funds may tilt to one favoured region or another, but broadly speaking, they take away the pain for a retail investor of backing the wrong horse.” Indeed, the world economy is more tumultuous than ever. With some countries wrestling with inflation, others burdened by soaring government debt, and others, like China, facing deflation, a global approach can act as a buffer, offering exposure to different economic cycles and reducing country-specific risks.
Global Businesses, Global Approach
In today’s interconnected world, limiting your investments to one region can mean missing out on significant opportunities elsewhere.
US-Weighting Consideration
While global funds often provide greater diversification, it’s worth noting that many are heavily weighted towards the booming US market, which has outperformed the UK economy since 2008.
The Bottom Line
If you are looking to invest in only one equity fund, consider one with global exposure. However, it’s paramount to assess your existing portfolio to ensure you’re truly diversifying and not just doubling up on US or tech stocks, given their significant weighting in world indices.
Investing is about building the future you envision. In this increasingly interconnected world, a global perspective can be a powerful tool in crafting that future wisely.
Source: FT, 17/08/2023, link to article
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