Morningstar analysis of the shift towards US exposure in UK multiasset funds over the past decade has left managers with food for thought in the current environment of uncertainty around factors such as currency risk.
The data and services provider says that over the past decade, UK multi-asset funds have increasingly moved away from home bias towards the US.
Its data suggests that in the 40–60% equity category – where portfolios typically hold around 50% in equities – the average fund’s exposure to US stocks has more than doubled as a share of their equity holdings, soaring from 25% in 2017 to over 50%. Meanwhile, UK equity exposure has plummeted from 46% to just 20%.
Morningstar says that this matters because the trend highlights a significant transformation in UK investment strategies, marking a decisive move away from traditional home bias. For investors, it underscores the importance of a diversified global approach amid rapidly changing markets.
Source: Morningstar Direct
Tom Mills, Principal for Multi-Asset Strategies at Morningstar, said: "This shift marks a sharp decline in home bias, as managers have pursued greater global diversification and investment opportunities abroad. While UK equities have faced headwinds in the past decade, US equities have massively outperformed, driven by tech and growth giants that are largely absent closer to home. Additionally, the rising prominence of US companies in global indices has made underweighting the US a riskier call for managers seeking competitive returns."
"Whether this trend continues is uncertain. Recent volatility and uncertainty centering on the US, and underlying US dollar exposure could give managers pause for thought - though it’s too early to call a reversal."
