• Gareth Wright

There’s no place like home: UK bias still exists in investor portfolios

UK investors still show a bias to British stocks despite persistent long-term underperformance, new research from Quilter Investors has shown.

The survey of people with at least £60,000 in investible assets found that of those who claim to know where they’re invested, some 64% have more than 25% of their portfolio invested in the UK – the worst performing major equity market of 2020 – and around 8% claim to have all their eggs in the UK’s basket. Nearly half (46%) had more than 50% of their investments in the UK.

This is despite the UK making up a relatively small part of global market indices. The latest factsheet for MSCI’s flagship ACWI Index showed the UK accounts for just 3.67% of the index, compared to 58.67% for the United States.

The performance of UK stock markets has lagged behind global peers over recent years as a result of the pandemic and the fallout from the EU referendum in 2016.

The research found just over a third (36%) that knew where their money was invested had less than 25% of their portfolio invested in the UK. Meanwhile, there were over a quarter (26%) of those surveyed that did not know where their money was invested.

Danny Knight, investment expert at Quilter Investors, said, “there is great efficacy in holding a sterling-based portfolio as this helps to remove the currency risk associated with holding overseas investments. Naturally this will lead to a higher UK exposure to other regions, but investors need to be careful they aren’t holding too much with just one region, even if is your own country.

“While the UK does look attractive as a result of the vaccine rollout, long-term structural issues remain, so investors would be prudent to take advantage of tactical opportunities. The biggest opportunity set is in the small and mid-cap space right now, so taking an active approach could be the best way to get the most of this opportunity.

“People often like to see the names of companies they know in a portfolio as they can easily equate where their money is going or feel a sense of shared prosperity when that company does well. But this is not a strategy that is likely to pay off in the long-term.

“Global diversification is as important as asset class diversification, and given how we expect the global recovery to play out it will not just be the UK that will see strong economic growth and demand. Ensuring you don’t have a home bias will be important to make the most of this rebound.”

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