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The global funds with the highest exposure to the US

27 October 2022

The US is a dominant player in the global market, but these funds including Fundsmith Equity and JPM Global Focus have invested more than 70% of their assets in the country.

By Tom Aylott,

Reporter, Trustnet

As the world’s largest economy and home to some of its most recognisable companies, the US is often a sizable weighting in any global portfolio.

Its economy is worth almost $23trn (£20trn) with the second largest, China, running about $5.3trn behind, according to the World Bank. In fact, the US economy is seven times bigger than the UK’s.

It’s no surprise then that the country accounts for a significant 70% of the MSCI AC World index.

However, despite already having such a dominant presence in the global market, some managers increase their exposure to the US beyond the overwhelmingly large weighting in the index.

Here, Trustnet has found the IA Global funds that have the largest exposure to the US. We only included portfolios that disclosed their weightings to the USA and removed any passives.

Funds that were not available to private investors, had assets under management (AUM) below £100m or had launched less than three years ago were also filtered out.

Source: FE Analytics

The Wellington Global Innovation fund had the highest exposure to the US over any other IA Global fund, with an allocation 13.3 percentage points higher than the MSCI ACWI’s at 83.3%.

Since launching in early 2019, the portfolio has also managed to outperform its peers in the sector by 38.8 percentage points, making a total return of 89%.

Following closely behind was the Guinness Global Innovators fund, which had an 82.9% exposure to the US.

Although this considerable overweight varies from the index, the fund’s returns were 158.9 percentage points higher than the sector average over the past decade, up 321.9%.

Total return of fund vs sector over 10yrs

Source: FE Analytics

Pictet Smart City had the third highest US weighting at 77.1%, but was not able to outperform the its IA Global peers over the long run, unlike the two previous funds.

The €1.3bn (£1.1bn) fund, which invests in global urbanisation and city infrastructure, fell 67.9 percentage points behind its peers, with making 95% over the period.

The largest fund on the list, Fundsmith Equity, which has £22.3bn in AUM, also held a large overweight of 74.2% to the US.

Likewise, Fundsmith Sustainable Equity – its environmental, social and governance (ESG) counterpart launched in 2017 – had an even higher exposure of 76.9%.

Guillaume Paillat, multi-asset manager at Aviva Investors, said that the US is fairly reliable market to invest in, hence the large allocation to the region in many global portfolios.

He said: “Strategically, we see US equities as better placed to deliver performance with the US economy supported by better economic fundamentals such as energy independence, leadership in technology but also deep capital markets.”

However, this has not been the case in 2022, with the US’s tech-heavy market taking a fall in the rotation towards value. As such, eight of the 12 global funds with US exposures exceeding 70% fell below the sector average since the start of 2022.

This year, GAM Star Disruptive Growth had the biggest decline at 29% whereas Schroder Global Healthcare had the shallowest dive of 0.9%.

Paillat was no phased by the decline in US equities as he anticipates continued resilience from the region in future.

He said: “For a GBP based investor, US equity performance hasn't been dissimilar to the UK domestic market due to the strength in the US dollar which we expect to continue.

“US company earnings should be more resilient to that currency strength than other regions due to a larger domestic market.”

Dan Brocklebank, UK director for Orbis Investments, on the other hand said that having over 70% of a portfolio in a single country would be “very risky” but many investors are locked into these overweights by passive funds.

Instead, he holds around 44% of assets in the US within his global funds. Although this is still a generous chunk of the portfolio, Brocklebank noted that it is “a meaningful underweight relative to the benchmark”.

He added that the US is a large and diverse market with plenty of appealing opportunities, but investors typically have to pay more money for them.

“The US trades at higher valuations than the rest of the world so it is not obviously cheap in a way that might justify such a large weighting,” Brocklebank said.

“From a bottom-up perspective , we find it relatively easy to find stocks outside the US trading at what we believe is below their intrinsic value.”

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.