Although the UK now represents a paltry 3.5-4.0% of global equity indices, home bias in the domestic stock market is estimated at c 25% across institutional and retail investors. This persists across asset classes: in the Investment Association universe of open-ended funds, 28.1% of total AUM at the end of September 2023 was invested in UK sectors. This leaves a significant amount of investors' assets exposed to overseas markets that may be unfamiliar and harder to access. In such a situation, the temptation may to follow the c £110bn already invested in UK-based global equity ETFs. But do these truly offer diversification, when the weighting of the US in these indices is between 60% and 70%? In this note we argue that in order to achieve meaningful diversification, investors need to go beyond the obvious.
