Janus Henderson: UK investors up home bias in rotation away from US equities

Investors dropped their US exposure ‘well below the global average’ and retreated to UK equities as global market volatility mounts

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Investors in the UK increased allocations to their home market as they lowered exposure to the US over the past year, according to a new report from Janus Henderson.

The survey of 1,229 portfolios found that the average UK allocation increased from 19% to 21% over the past year, whilst US holdings fell from 45% to 41%.

Although US equites remain a significant portion of portfolios, it is “well below the global average,” according to the report. Investors in the UK hold 24 percentage points less in the US than the Global Equities index.

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Janus Henderson noted this “shift in regional preferences” was a reaction to heightened volatility in global markets.

“Despite overall strong performance of US markets, UK investors are responding to recent volatility by seeking out opportunities closer to home,” the report said.

Seeds of optimism for small caps

It also highlighted a mild rotation away from large caps and into smaller companies, which Janus Henderson said could accelerate if macro conditions improve.

Investors in the UK dropped their large-cap allocation from 70% to 68% over the past year, adding one percentage point to small-caps at 9% in total.

The report said: “A supportive economic backdrop encouraged investors to start pivoting their focus towards smallercapitalisation companies, shifting away from the previously dominant mega-cap technology giants.”

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Nevertheless, UK investors’ risk appetite remained tepid, with many continuing to hold a third (33.7%) of their portfolios in fixed income.

Most of this exposure (77%) was in defensive bonds, with allocations to more adventurous assets such as flexible bonds slumping from 19% to 16% over the past year.

Janus Henderson said UK investors are tentatively testing the waters when it comes to small caps, while keeping one foot planted in the safety of fixed income. A more positive macro backdrop could see investors become more bullish on the asset class.

“This reflects a balance between seeking new growth opportunities and preserving stability in an uncertain macroeconomic environment driven by geopolitical realignment, tariff threats, and diverging central bank policies,” the report added.

This story was written by our sister title, Portfolio Adviser