UK investors still failing to take advantage of investing overseas

Investors’ concerns about committing to overseas markets are reflected in the high percentage of UK equity assets currently under management.

According to the Investment Management Association, UK equities accounted for 67.1% of equity assets under management at 30 September 2006, an increase of 2.5 percentage points over five years.

The rise in UK equity assets under management and the relative decline in global equity assets under management have occurred despite strong performance from Asia Pacific and emerging markets since the beginning of 2000. Investors who were predominantly invested in the UK would more than likely have missed out on superior returns overseas.

A global fund of funds offers a solution for investors who wish to take an active global approach to investment, taking advantage of superior returns in overseas markets whilst carefully controlling portfolio risk. Fund of funds managers, such as Mark Harris and Craig Heron at New Star, will make complex macro-economic, market-timing and currency exchange rate decisions on behalf of investors, weighting their portfolios to regions showing the best prospects at any given time. By spreading risk not only across markets and regions, a fund of funds manager will spread risk further by selecting a portfolio of the best funds in any specific region or market.

Currently, with no sign of the amount of assets under management invested in the UK decreasing, it appears UK investors are sacrificing potentially superior returns for investing within their comfort zone.

Ben Robinson, head of UK retail public relations at New Star, says: “Whilst the UK should always represent a core holding for any UK investor, it is best not to have too many eggs in one basket. A global approach to investing can offer broader diversification and greater investment potential. For UK investors who are anxious about committing to unfamiliar markets, a global fund of funds approach, such as that offered by the New Star Active Portfolio, offers a simple solution.”