By Scott Wright
THE case for UK investors having a bias in their portfolios towards domestic equities is becoming “weaker and weaker”, according to Weatherby’s Private Bank.
The institution notes there continues to be a “home bias” despite the UK’s share of global markets declining for several years, and uncertainty continuing to shroud the economy. “We believe the argument for having a UK bias in an investment portfolio is getting weaker and weaker,” said John Butters, chief investment officer. “Many investors are guilty of ‘home bias’ – having too much money in their own nation’s markets relative to the size of that nation’s market in global terms. For example, UK equities account for little more than 3.54 per cent of global stock market capitalisation. Yet for many UK investors, the UK market might account for 50% or more of their equity exposure, leaving them over-exposed to any UK-specific risks. There is no end to the uncertainty.”
Weatherby’s cites a lack of tech stocks as the “main reason” for the UK’s under-performance. It said: “The UK hasn’t got a big IT exposure, yet these stocks have done pretty well elsewhere in the world, and that has been a huge problem for investors with a UK bias.” While many investors have shunned government bonds since the global financial crisis, Weatherby’s said: “Performance of certain government bonds has been almost as good as global stocks since 2011 – and even better at certain times.”
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