MSCI WORLD EX USA UCITS ETF

gravel_2

https://www.marketwatch.com/story/liquidity-is-starting-to-dry-up-as-the-fed-conducts-qt-and-bank-lending-slows-says-jpmorgan-afbb556c

AAZ

I have a contrarian view, with new Bidenomics and is very likely trump will do the same, US is investing huge capital in industries of future. They have realised they cannot depend on China and Asia for semiconductors etc and it is very likely we will see new renaissance of US industrial base, so I will like to be more in US and not less.
Very new to investing but most of my money is invested in VUSA and VWRL and I am even planning to go and invest in EQQQ
May be a crazy thing but I don't see in next 10 years US coming down 

Linton

My reason for restricting my growth portfolio to 40% US is that I believe ROW will perform better. I have no idea and no views as to what the future will bring. But rather because any more than 40% in one component of the world market gives too much risk of a single point of failure and too much risk of other potential future areas of  possible growth being squeezed out.

It seems to me that 65% or so in US and 0-3% in China is crazy.

aroominyork

Linton said:

My reason for restricting my growth portfolio to 40% US is that I believe ROW will perform better. I have no idea and no views as to what the future will bring. But rather because any more than 40% in one component of the world market gives too much risk of a single point of failure and too much risk of other potential future areas of  possible growth being squeezed out.

It seems to me that 65% or so in US and 0-3% in China is crazy.

I also limit my US to 40-45% (your influence, Linton - you owe me a few pints for how that has worked recently) but you cannot compare 65% US to 0-3% China. China's economy does not correlate to its stocks; it's telling there only seems to be one China index fund (Pictet, with Tencent and Alibaba comprising 21% - it puts the Mag7 to shame!) and that only holds £184m.

GazzaBloom

Global trade is now very different to the 80s/90s and early 2000s and will continue to change through the coming decades.

I believe It's more complicated than simply considering the percentage of US domiciled businesses that you hold, to determine your exposure to the fortunes or otherwise of the US economy.

40% of the revenues of the S&P500 constituents are derived from outside the US. Apple, Microsoft, Alphabet, Coca-Cola, etc…

So, you could argue that holding a global market cap weighted index with a US weighting of 65% is in fact only exposing you to 40% of US domestic trade and 60% ROW.

Consequently, it could be viewed that holding 100% US fund, such as the S&P500 already gives you 40% international exposure.

And that's before we look at how much revenue ROW companies derive from the US.

It's potentially mind bogglingly complex but can be made far simpler by just not worrying about it.

noclaf

Could see myself using that ETF in my ISA alongside US and EM ETF's however it does not appear to be available on Fidelity (yet).

I am somewhat split re. US allocation; on the one hand am slightly concerned about concentration risks however can't see a good reason why the US would be derailed from their current trajectory unless wheels come off the economy or war etc.

I am circa 15 years from retirement age so SIPP and work pension remain around 70% US as I have time to navigate the peaks and troughs of the markets (I hope!).

Linton

GazzaBloom said:

Global trade is now very different to the 80s/90s and early 2000s and will continue to change through the coming decades.

I believe It's more complicated than simply considering the percentage of US domiciled businesses that you hold, to determine your exposure to the fortunes or otherwise of the US economy.

40% of the revenues of the S&P500 constituents are derived from outside the US. Apple, Microsoft, Alphabet, Coca-Cola, etc…

So, you could argue that holding a global market cap weighted index with a US weighting of 65% is in fact only exposing you to 40% of US domestic trade and 60% ROW.

Consequently, it could be viewed that holding 100% US fund, such as the S&P500 already gives you 40% international exposure.

And that's before we look at how much revenue ROW companies derive from the US.

It's potentially mind bogglingly complex but can be made far simpler by just not worrying about it.

I agree trhat in a global market individual countries are less relevent than you may think except for one key factor.  Different countries have very different sector allocations. Much of the same arguments on the global nature of large companies could be applied to the FTSE100. Which has more or less zero tech.

7 of the top 10 underlying investments in the FTSE AllWorld are the US tech giants amounting to about 15% of the total.  On their own these 7 companies together are larger than any other country than the US represented in the index. eg Japan is 9%.  Given that the companies are likely to be fairly closely correlated this to my mind represents a far greater concentration than is reasonable and hence a far greater risk than I am happy to accept.  Plus there is the impact on the amount available to invest in the rest of the world.

My own global growth portfolio, which is somewhat more defensive than the FTSE All World,  is based on 40% US,  and has 7% of the portfolio in the top 7 underlying holdings, 2 are US, and the other 5 are European.

masonic

noclaf said:

I am somewhat split re. US allocation; on the one hand am slightly concerned about concentration risks however can't see a good reason why the US would be derailed from their current trajectory unless wheels come off the economy or war etc.

If you look back through history, there are many different causes of once thriving stock markets going into decline, and few of them were obvious without the benefit of hindsight. One practice that's fairly common within the largest US companies is that of enshittification. I think we have all experienced it. 

Thinking back nearly 25 years, I can remember the frustration with the then nascent internet being dominated by a few tech companies like Altavista and Yahoo, whose user experience was pretty rubbish, but users put up with this as there were no better alternatives. Then around the time of the dotcom crash a new upstart innovated a suite of much better products and hoovered up the market. This company happened also to be listed in the US, as that was still the place to be at that time. But that might not always be the case. 

Just as the largest companies of the S&P500 have been responsible for pretty much all of the recent growth, they would have a disproportionately negative effect on the market if they were to go into decline in the future. The fact that many of them are in the same sector makes this more of a concern. Historically the US has been the largest single market of the goods and services these companies produce, but this is shifting. We're seeing more protectionism. I have no idea how those trends will play out, but a slight tilt away from the current generation of mega-tech gives a little more balance to a portfolio. This could be done without shifting away from the US in general by overweighting smaller companies, if that's preferable. But its been my observation that US smaller companies haven't given much in the way of a risk premium for the entire time I've been an investor.

Personally, I prefer to stick to S&P500 and underweight it a bit (to 45%), then use that to overweight other regions, including some home bias (adding to UK mid and small caps, not FTSE 100). This also gives me more exposure to what would be considered a smaller company in US terms. This makes my largest single company holding 3%, rather than 4% for FTSE All-world, 4.5% for FTSE World, or close to 7% for S&P500.

noclaf

masonic said:

Personally, I prefer to stick to S&P500 and underweight it a bit (to 45%), then use that to overweight other regions, including some home bias (adding to UK mid and small caps, not FTSE 100). This also gives me more exposure to what would be considered a smaller company in US terms. This makes my largest single company holding 3%, rather than 4% for FTSE All-world, 4.5% for FTSE World, or close to 7% for S&P500.

This seems like a reasonable approach, I've recently made adjustments to reduce US exposure e.g added Dev markets + EM equities to my LISA (was 100% S&P500 till recently) and added an active UK Smallcap fund to my work pension which was heavily skewed to US/tech. My ISA has 2 bonds funds, Dev/EM Largecaps and FTSE 100 to avoid being too heavily US weighted. My SIPP is in a single dev markets tracker and being my largest holding not decided whether to make any changes..... trading costs being the primary consideration before pulling the trigger.