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UK investors up home bias in exodus from US stocks

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British investors continued upping their ‘home bias’ for UK stocks over the last year while withdrawing from US equities, reacting to fears of a global trade war and faltering US economy.

Average UK allocation increased from 19 per cent to 21 per cent over the past year, whilst US holdings fell from 45 per cent to 41 per cent, according to data from Janus Henderson.

In comparison, 65 per cent of the Global Equities Index is allocated to US stocks, while only three per cent is allocated to UK equities.

“Despite overall strong performance of US markets, UK investors are responding to recent volatility by seeking out opportunities closer to home,” the report said.

“The UK is a prime market for income, significant share buybacks, and the persistent discount on its market, marking a compelling moment for investment,” added one investor in the report.

The report, which studied over 1,200 UK portfolios, found that investors also kept their investments in European stocks stable, at 14 per cent. This is slightly higher than the Global Equities Index, at 11 per cent.

The news comes as a Bank of America (BofA) survey found that global investors were fleeing US stocks at their fastest rate on record in favour of British and European equities.

“A majority now expect the Trump administration to have a negative impact on growth and a positive impact on inflation, effectively anticipating a stagflationary environment,” explained BofA investment strategists Andreas Bruckner and Sebastian Raedler.

Meanwhile, the amount that UK investors allocate to alternative investments also fell, from 3.4 per cent to 3.3 per cent.

This was caused entirely by a collapse in investment in long-short equity strategies, which more than halved over the last year.

“It will be interesting to see how investors act over the next few months and whether the decline in appetite for long-short equity strategies is continuous or a short-term trend,” said Matthew Bullock, head of portfolio construction and strategy, EMEA and APAC, at Janus Henderson.

The amount allocated to passive or index funds also decreased slightly over the last year, from 44 per cent to 43 per cent, which caused average portfolio expenses to tick up from 0.4 per cent to 0.42 per cent.