Fund giant slashes UK exposure as investors sour on Britain
One of the world’s largest money managers is shedding its investments in the UK, after investors said they wanted more of their cash to be allocated overseas despite a government push to encourage investment in domestic equities.
Vanguard, the world’s second largest asset manager, said it would reduce its £52bn Life Strategy fund’s UK equity allocation from 25 per cent to 20 per cent, offloading roughly £1.9bn worth of stocks.
UK bond exposure will also be cut from 35 per cent to 20 per cent.
Vanguard’s decision to reduce its UK exposure comes as domestic investors become “more comfortable with global diversification”, with some expressing “a clear preference” of having allocations overseas.
However, the company said it continued to have “strong conviction in the UK” as part of its diversified portfolio, investing more than £140bn in UK listed equities and managing around £220bn in UK domiciled funds.
The changes will be implemented in phases from the end of March until June.
Blow for Reeves
The move comes despite the UK government’s attempts to increase domestic investment in London listed equities to ultimately boost the economy.
Vanguard is among the financial firms who agreed to fund a UK government backed campaign aimed at encouraging retail investing and is due to launch in April.
Meanwhile, pension funds agreed to invest at least 5 per cent of their assets into UK private markets under the Mansion House Accord last year, after a number of British pension funds and institutions reduce their exposure to domestic share holdings to invest more in global stocks.
Charles Hall, head of research at Peel Hunt, said “you couldn’t make it up” on Linkedin, referencing Vanguard’s decision to look away from the UK despite its out performance of other major markets.
UK stocks outperformed Wall Street in 2025 amid tariff turmoil and asset managers opting to look away from the tech heavy US markets as AI bubbles fears ballooned.
The FTSE 100 rose by 21.5 per cent in 2025 compared with 16.4 per cent for the benchmark S&P 500 in the US.
The Chancellor also introduced a three year stamp duty holiday for new listings on the London market, and slashed the cash ISA ceiling to £12,000 in the Autumn Budget to push Brits away from cash savings.
Cutting fees
Alongside the allocation changes, Vanguard is also cutting fees from 0.22 per cent to 0.2 per cent from January 2027.
The reductions are estimated to return more than £10m to UK investors and follows £16.5m in fee cuts made to Vanguard’s European ETF range last year.
The company, which holds £9 trillion in assets also launched a new range called Life Strategy Global.
It comprises five funds for investors who want their money invested fully across global markets, without giving extra weight to the UK.