UK multi-asset funds have doubled their exposure to US equities over the past decade, according to data from Morningstar.

It noted that UK multi-asset funds had “dramatically reshaped” their equity allocations in the last 10 years, reducing their home bias and increasingly favouring US equities.

Morningstar’s data in the 40 per cent to 60 per cent equity category, where portfolios typically hold approximately 50 per cent in equities, the average fund’s exposure to US stocks has more than doubled as a share of their equity holdings.

US equity holdings in these funds have risen from 25 per cent in 2017 to more than 50 per cent.

On the other hand, UK equity exposure in these funds has dropped from 46 per cent to just 20 per cent.

Morningstar said that its findings highlighted a “significant transformation” in UK investment strategies, marking a move away from the traditional home bias.

Furthermore, it argued that the data underscored the importance of investors adopting a diversified global approach amid rapidly changing markets.

“This shift marks a sharp decline in home bias, as managers have pursued greater global diversification and investment opportunities abroad,” stated Morningstar principal for multi-asset strategies, Tom Mills.

“While UK equities have faced headwinds in the past decade, US equities have massively outperformed, driven by tech and growth giants that are largely absent closer to home.

“Additionally, the rising prominence of US companies in global indices has made underweighting the US a riskier call for managers seeking competitive returns.

“Whether this trend continues is uncertain. Recent volatility and uncertainty centring on the US, and underlying US dollar exposure could give managers pause for thought - though it’s too early to call a reversal.”

---