Gleeson understands why investors like staying close to home, but believes their lack of exposure to international markets could come back to haunt them. "UK investors have a natural bias to UK funds because they’re more familiar with the companies," he explained.
"Investors seem to think this makes them less risky, but in reality equity risk is completely independent of how familiar you are with a market."
"For this reason, you see a lot of international markets underrepresented in portfolios."
Gleeson points to the US equity market as a particularly under-represented area with UK investors. "Sixty-five per cent of the global equity market is the US, but it’s safe to say investors don’t have 65 per cent in it," he said.
"It’s alien to UK investors, but by automatically dismissing it they are losing out on a dynamic market place with an excellent business model."
"The US has had a tough time of late, but it’s certainly got a place in a portfolio. Even Europe seems to get more coverage, but investors know more about it."
The results of the latest FE Trustnet poll support Gleeson’s assertion; fewer than half of the 577 respondents hold a US fund in their portfolio.
According to FE data, there are 114 funds across the IMA North America and North American Smaller Companies sectors, with combined assets under management (AUM) of £29bn.
By contrast, there are 445 funds across the IMA UK All Companies, UK Equity Income and UK Smaller Companies sectors, with combined AUM of £166bn.
With 168 funds and £46bn AUM, the European market is also better represented in the IMA universe.
Performance of sectors over 5-yrs
Source: FE Analytics
According to FE Analytics, the IMA North America and North American Smaller Companies sectors have significantly outperformed their UK and European rivals over a five-year period, with less volatility. They also come out on top over three years.
Gleeson is a particularly big fan of the AXA Framlington American Growth and F&C US Smaller Companies funds.
Joanna Shatney, head of US large cap equities at Schroders, says she is very optimistic about the outlook for the US market at present.
"I’ve never experienced value like this – it is hugely compelling," she said. "Price-to-earnings [of the S&P 500] are still at the low end of the scale. At this range, I think we can expect a 15 to 20 per cent return over one, three and five years."
Shatney acknowledges that the market is more expensive than others, but says it is not on a premium relative to its risk/return profile.
She points to the US market’s stronger fundamentals relative to the UK, Europe and Japan – particularly with regard to deleveraging.
Shatney says the sustainable deleveraging of the banks and corporates puts the US in a strong position, although she accepts there are still question marks over the debt levels of the US consumer and government.
The manager adds that the US’s attractive demographics and business innovation will be strong drivers for long-term performance.
Shatney heads up the Schroder ISF US All Cap and US Alpha Plus funds. She has returned 33.58 per cent over the last five years, beating her peer group composite by around 9 percentage points.