UK-based multi-asset funds have more than doubled their exposure to US equities in the space of eight years, after decades of heavy home bias.
The latest data from Morningstar shows the extent to which home bias has been reduced and replaced by larger allocations to American shares.
In the 40–60% equity category, with multi-asset funds typically holding around 50% in equities, the average exposure to US stocks has more soared from 25% in 2017 to over 50%.
Meanwhile, UK equities exposure has plummeted from 46% to just 20%. That has not completely eliminated home bias though, as 20% is still significantly higher than the UK weighting in global equities indices.
Morningstar dubbed this a ‘significant transformation’ in UK investment strategies, marking a decisive move away from traditional home bias.
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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,” he continued.
“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.”
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