US vs the rest: where the big global funds are betting

We spend plenty of time bemoaning the fact that the standard global equity tracker is awash with US stocks.

That’s something that might trouble more cautious investors, whether they worry about US valuations broadly or, for example, the artificial intelligence (AI) spending spree carried out by most of the Magnificent Seven cohort.

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As we’ve discussed before, those worried about this can take different approaches to passive investing, be it selecting their own regional equity funds or using the Vanguard LifeStrategy franchise.

But actively managed global equity funds are an option too, given that some stock pickers very much look beyond the US.

Having said that, it can be difficult to keep tabs on the different bets fund managers are taking here.

This piece looks at around 30 of the major global equity funds and investment trusts out there (both growth and income-focused) and sets out which names are betting big on a given region.

The US, not the rest

Global equity managers have often avoided deviating from the MSCI World index too much when it comes to their US allocations, because of the market’s impressive growth but also likely the risk of underperforming by not holding the big tech stocks. 

And a few names do still bet big on the world’s biggest market.

Let’s take one of the biggest and now more contentious funds available to UK investors first.

Fundsmith Equity I Acc (B41YBW7), whose manager Terry Smith overhauled the portfolio in the first half of this year in order to adapt to more momentum-driven markets and rescue his performance figures, has ended up with an even higher US allocation than before.

The US accounted for almost 85% of the fund at the end of July, with US holdings in the top 10 including Mastercard Inc Class A (NYSE:MA), Stryker Corp (NYSE:SYK), Waters Corp (NYSE:WAT), Visa Inc Class A (NYSE:V), Microsoft Corp (NASDAQ:MSFT), Yum Brands Inc (NYSE:YUM), Uber Technologies Inc (NYSE:UBER) and Church & Dwight Co Inc (NYSE:CHD). 

This fund’s allocation to European equities appears to have funded a lot of this increase, coming to just 12.2% now.

Smith has notably sought to bag more momentum in the portfolio, meaning that growth stocks in the US might appeal more.

And he is not alone: WS Blue Whale Growth R Sterling Acc (BD6PG78), which has focused heavily on AI stocks, has almost 80% of its portfolio in the US. 

Top holdings include Applied Materials Inc (NASDAQ:AMAT), Broadcom Inc (NASDAQ:AVGO), NVIDIA Corp (NASDAQ:NVDA) and Lumentum Holdings Inc (NASDAQ:LITE).

A few other growth-oriented funds have big US allocations. 

There’s Morgan Stanley UK Global Brands and JPMorgan Global Growth & Income Ord (LSE:JGGI), the latter of which has been known to have a decent level of exposure to the Magnificent Seven in recent years.

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But there are also some more cautious funds.

Rathbone Global Opportunities Fund S Acc (BH0P2M9), whose manager we recently interviewed, tries to combine growth holdings with more defensive stocks.

The fund arguably has a lower allocation to the tech sector than peers, too, although it has struggled in the last year.

With the US accounting for roughly 72% of the MSCI World index, it’s easy to have lots of money in US shares but still technically have an underweight allocation to the market.

That’s the case for both F&C Investment Trust Ord (LSE:FCIT) and Alliance Witan Ord (LSE:ALW), which both seek to give fairly diversified takes on global markets. Both have US allocations at around the 55% mark.

Going East

Asia and the emerging markets are a popular region for now, even if much of the recent rally is driven by AI darlings Taiwan Semiconductor Manufacturing Co Ltd ADR (NYSE:TSM), Samsung Electronics Co Ltd DR (LSE:SMSN) and SK hynix Inc ADR (NASDAQ:SKHY). 

Some funds have decent allocations here, although very little on the scale of the US weightings we saw earlier.

Ranmore Global Equity D GBP (BV8GHL6), the value fund that has a mere 27% of its portfolio in the US and benefited from the South Korean market rally last year, among other things, has roughly half its money in Asia and the emerging markets.

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But it’s the leader on this front by quite a margin. Artemis SmartGARP Glb Eq R Acc GBP (0679574) has around a third of its portfolio here, as does Artemis Global Income I Inc (B5N9956).

Note that Baillie Gifford vehicles Scottish Mortgage Ord (LSE:SMT) and Monks Ord (LSE:MNKS), which have backed the likes of TSMC and some Chinese names, have around a fifth of their assets in the region.

On the Continent

Plenty of funds, meanwhile, have a good amount of their portfolio in European shares. 

That includes potentially lesser-known (but large) funds like GQG Partners Global Equity I GBP Acc (BH480T7) and Artisan Global Value I GBP Acc (B3PYJ55), but also takes in a swathe of income funds.

Note the presence of Fidelity Global Dividend W Inc (B777808), which has decent weightings to Germany and France and holds stocks such as Roche Holding AG Ordinary Shares new (SIX:ROP) and Deutsche Boerse AG (XETRA:DB1).

IFSL Evenlode Global Income B GBP Inc (BF1QNC4), which has something of a quality growth investment style, holds the likes of L'Oreal SA (EURONEXT:OR), Wolters Kluwer NV (EURONEXT:WKL) and Lvmh Moet Hennessy Louis Vuitton SE (EURONEXT:MC).

Closer to home?

Finally, global funds with a big allocation to the UK are still a rare thing. 

That’s useful in preventing too much overlap for those who already hold shares in the UK market, directly or via funds.

Lindsell Train Global Equity B GBP Inc (B3NS4D2) and Evenlode Global Income each has around a quarter of its assets in the UK, and a good deal of overlap with a UK-focused sister fund. Artisan Global Value I GBP Acc (B3PYJ55) has around 16% in the UK.

One region seemingly neglected by many of these funds is Japan – suggesting investors should seek out a dedicated fund if they wish to enjoy any further gains from that market.