Lower US weighted passive fund

Shocking_Blue

Hi all,
I currently have my ISA allowances for the last few years in the following funds:
VLS (core)
HSBC Global Strategy
L&G Global Technology
There is a large US exposure overall and I'm just looking for a passive multi-asset fund that has a higher regional weighting elsewhere (not UK). Any ideas/suggestions?
Also, on the UK exposure question, VLS is about 22.5%, with HSBC much lower and L&G nothing. I've heard comment about people reducing UK exposure. 22.5% doesn't seem overly high - am I wrong about this?
Thanks in advance

Thrugelmir

Time for some background reading to get a better understanding of the indexes themselves.
Weightings are intentional for good reasons. 

https://www.msci.com/index-methodology

csgohan4

maybe a europe weighted fund/ETF or a pacific/Asia one? but depends on your risk appetite and strategy. Most World index trackers have a high proportion of USA stock.  

Albermarle

Also, on the UK exposure question, VLS is about 22.5%, with HSBC much lower and L&G nothing. I've heard comment about people reducing UK exposure. 22.5% doesn't seem overly high - am I wrong about this?

There are  different opinions on this subject .

Traditional pension funds and some advisors still like to have a High % for UK ( 40%?) as traditionally small investors were suspicious of investing 'abroad' and the currency risk of investments being in foreign currencies.

On the other side UK stock market only accounts for 5% of the worlds financial markets so advocates of global investing say this is how much UK you should have ( US is about 55% I think ) 

VLS are UK based funds heavily marketed to UK small investors and they have decided somewhere in the middle .

However UK stock market has generally underperformed in recent years and especially this year . So the more UK % the worse the performance.

Two caveats to this - no guarantee in future that UK will continue to underperform and the US overperform .

The above comments relate mainly to the equity part of an investments . If you have a multi asset fund like the ones mentioned they will have a % of non equity investments , mainly bonds. The argument against a UK bias is less clear for these and the argument for a UK bias is stronger ( in my opinion) .

Something like 15% UK equity and 40% UK bonds could be a middle ground maybe.

bowlhead99

You are right that 20ish percent doesn't seem like a lot to be investing in one's home country, but as Thrugelmir says, if you do some digging into the index methodology you will see why people don't advise putting a really high proportion of their money into the UK index - a lot of the money will be allocated to relatively few companies in particular sectors, which just happen to be listed on the UK stockmarket rather than elsewhere. 

Your HSBC fund attempts to avoid that skew by weighting its allocations between countries more closely to the size of global markets (so the UK only gets a small percent) but then moderates the currency risk by hedging some of the foreign assets.  No solution is perfect.

Your tech fund doesn't allocate much if anything to the UK market because it is allocating based on the relative size of the companies in the sector, and the UK stockmarket only has a small  number of technology companies while the US market has more market capitalisation in tech companies than the entire UK stockmarket has in all companies.

If you are looking to allocate your money into some sort of global index which has a lower US weighting, I would consider the iShares tracker "iShares Edge MSCI World Size Factor UCITS ETF", which tracks the MSCI World Mid Cap Equal Weighted Index (MSCI's factsheet here:  https://www.msci.com/documents/10199/ab676dca-7e03-4b6b-b5e6-d7aface0e844 ) 

That's an index which aims to take most mid-cap sized companies in the developed world markets (so ignoring giant ones and small ones) and then allocates money equally to each of them. As the individual holdings grow or shrink, they rebalance every May and November. With 900 holdings, the portfolio will start out having about 0.11% in each company, and over the six months, some may double  in relative value (go up to 0.2%+ of the portfolio) while some may fall (e.g. go down to 0.5%) and then they rebalance back to 0.11% again.  Over time, you should get the growth of the average company in the global developed market which falls in the fund's size range, without being over-exposed to any one of them- you'll never have several percent in any one company.

It's currently around 37% US, with a little over 20% Japan (as e.g. Japan happens to have a lot of companies that fall into the size range that it tracks). As you currently have a lot of exposure to large companies through VLS and your other market-cap weighted trackers, it could be sensible to add some extra weight to these smaller ones. And if you are trying to cut US exposure while still investing globally, it would make sense to hold a product that's <40% US rather than >50% US.

It will be a little less efficient than a pure market-cap-weighted global tracker as the periodic rebalancing process is inevitably going to cost money compared to just letting everything ride. Still, the relative exposure to smaller companies is something that may help in the longer run and the performance of equal-weight trackers is generally no worse than cap-weighting for most markets.

It's available on the London stock exchange under tickers IWFS (priced in pounds) or IWSZ (priced in USD) ; both are the same product just keeping score in a different way.
https://www.ishares.com/uk/individual/en/products/270057/