Just how global is your global fund?

Global funds remain a popular choice for investors looking for a core holding. They should bring diversified exposure to a broad range of countries and sectors, meaning that investors don’t need to think too hard about allocating to different countries around the world. However, after nearly a decade of US dominance, it is worth checking that your global fund is giving you the breadth of exposure you want.

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It is no secret that the US has become an increasing share of global indices over the past decade. At its peak, the MSCI World was around 73% weighted to the US. While this has moved back slightly in the recent market turmoil, it is still high by historic standards. In 2010, the US formed only around half of the major global indices. While this is a bigger problem for passive funds, active investors have also had relatively high weightings to the US. All of the global funds on the Chelsea Selection, for example, have more than 50% of their holdings in US-listed companies*.

This skew to the US has worked pretty well for most global funds. The US has outpaced other global markets, and its dominance has ensured that investors have also had plenty of exposure to the US dollar, which has continued to go from strength to strength. They have also had plenty of exposure to the unstoppable growth of the US technology giants, which has been the most important growth story of the past decade.

Equally, US dominance doesn’t necessarily mean that investors in global funds haven’t been getting exposure to, say, Asia or emerging markets, it’s just that they will be getting it through US companies selling into those markets. However, if investors want direct exposure to fast-growing markets such as India, or to the globally-important Taiwanese semiconductor sector, global funds have not been the best way to do that.

The recent market turmoil and the unpredictable actions of the new US administration have left investors more worried about their US exposure. While all countries have been hit by the recent wobble in markets, the US has proved particularly vulnerable. Some investors have called an end to ‘US exceptionalism’, suggesting that the time when US companies could command high valuations just because they were in the US is drawing to a close.

Certainly, while it has been the correct call to hold a high weighting in the US for much of the past decade, the potential risk and reward are more finely balanced today. Duncan Lamont, head of strategic research at Schroders, points out that there is still a huge valuation differential between the US and everywhere else: “Almost every industry group among international stocks trades at a significant discount to the US. The median discount on both a forward and trailing price/earnings basis is about 20%.” This needs to be weighed against the reality that the largest companies in the US are often the best in the world at what they do, and have large global franchises that are difficult to replicate.

What should investors be doing?

It is important to look at your other holdings. Diversifying away from the US may be more important if you want an active fund to provide balance against a passive weighting in, say, an MSCI World-focused ETF or similar.

A high weighting in the US is not necessarily a bad sign, but investors need to ensure that weighting is truly an active choice, and not simply a ‘benchmark-plus’ position. The funds among our list that have a high weighting in the US all fulfil that brief. There are two global funds on the Chelsea Selection that have a weighting higher than the 72% in the MSCI World index: BlackRock Global Unconstrained Equity and T. Rowe Price Global Select Equity.

A few other notable funds that have over 70% in US, but with a portfolio that looks very different to the index, would be Guinness Global Innovators, Liontrust Sustainable Future Global Growth, CT Responsible Global Equity and Morgan Stanley Global Brands*. None hold more than three of the ‘Magnificent Seven’ among their top ten, for example**.

The alternative is to look at funds that have the broadest geographic spread. At the other end of the spectrum, a few of the most “global” of the global funds are Ranmore Global Equity, Artemis Leading Consumer Brands, Lazard Global Equity Franchise, Ninety One Global Environment, IFSL Marlborough Global Innovation and WS Montanaro Global Select.

Ranmore Global Equity has just 18% in the US, with 16% in Europe and 12% in the UK**. The Artemis fund has a 59% weighting in Europe, where luxury brands tend to be concentrated (Hermes, Prada, Ferrari, for example)**

A final point: in recent history, the prevailing view has been that it didn’t particularly matter where a company was listed. What mattered was from where it drew its revenue and profits. However, in an era of higher tariffs and greater protectionism, where a company is listed may come to matter more. Against this backdrop, investors may need to consider their global funds more carefully.

*Source: FE Analytics, at 17 April 2025
**Source: fund factsheet, March 2025

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and fund managers and do not constitute financial advice.