Savings & investment
Harry Scargill
When looking through their portfolios, some investors are surprised by how much of their money is invested overseas, and how little is invested here in the UK.
For many years, overseas investments were something of an optional extra, a satellite around a UK core.
That has changed dramatically, and today they typically make up the bulk of most clients’ investments.
In this article we look at how that balance has shifted over the past few decades, the benefits and risks of investing overseas, and why it makes professional guidance more valuable than ever.
The UK remains one of the world’s major financial centres, but its stock market is a relatively small part of the global picture.
At the end of August 2026, UK companies made up around 3.1% of the MSCI All Country World Index, a widely used benchmark for global shares.
US companies accounted for around 63.6% and Japan 5.1%, while Taiwan, at 3.3%, is now larger than the UK.
| Market | Approx share of global equities |
|---|---|
| US | 63.6% |
| Japan | 5.1% |
| Taiwan | 3.3% |
| UK | 3.1% |
To put that in perspective, a single US company, Nvidia, now carries a larger weight in the global index than the entire UK stock market.
Despite this, most UK-based diversified portfolios still hold more in UK shares than the UK’s share of global markets would suggest. This is known as “home bias”.
It can be sensible, not least because it keeps more of your money in the currency you spend, but it has become less pronounced over time.
Even so, the majority of the shares in a typical modern portfolio are now listed overseas, and bond holdings increasingly include government and company debt from around the world.
It was not always this way.
In the late 1980s, global stock markets looked very different.
Japan’s stock market was roughly as large as America’s in global indices, and at its 1989 peak made up around 45% of the MSCI World Index of developed markets.
The UK accounted for around 10%, and markets such as China, India, Taiwan and South Korea were not included at all.
Today the US makes up nearly two-thirds of the global index, Japan around 5% and the UK around 3%.
Investors’ portfolios have followed the same path.
In 1997, UK pension funds held more than half of their assets in UK shares.
By 2021, according to research by the think tank New Financial, that figure had fallen to just 6%.
Over a longer period, the share of the UK stock market owned by UK individuals and institutions fell from 96% in 1981 to 42% in 2022.
Several forces have been driving this shift:
More recently, policymakers have stepped up efforts to encourage more investment back into UK companies. For now, however, a global approach remains the norm.
Many of the world’s most innovative and profitable businesses simply are not available on the London Stock Exchange.
Investing globally lets a portfolio own leading companies in areas such as:
Different economies move through different cycles, respond differently to interest rates and are exposed to different sectors.
Spreading investments across regions reduces dependence on the fortunes of any one country, including our own.
Emerging markets, such as India and other parts of Asia, benefit from younger populations, a growing middle class and rising productivity.
These are powerful long-term trends that are hard to capture through UK-listed companies alone, offering access to different sources of economic and corporate growth.
Global diversification does not automatically mean a portfolio is well diversified.
The rise of the “Magnificent Seven” (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla) means that a large slice of global stock market value now rests on a handful of companies.
As of 18 September 2026, these seven companies make up around 34% of the US S&P 500 index, compared with around 12% a decade earlier, and roughly a fifth of the global index.
Their growth has been remarkable, but concentration works both ways: in 2022 the group fell by roughly twice as much as the wider US market.
Japan, which dominated global indices in 1989, is a reminder that market leadership does not last for ever.
Some markets, especially in the emerging world, carry greater uncertainty around government policy, corporate governance and investor protections.
Trade tensions and tariffs can also affect companies with international supply chains.
When you invest overseas, unless the currency is hedged, you are also taking a position on exchange rates.
Suppose a US share rises 10% in dollar terms, but the pound strengthens by 10% against the dollar over the same period. The gain measured in sterling could be largely eliminated.
However, if the situation is reversed, a 10% share rise in dollar terms with a 10% weakening of the pound gives a UK investor substantial gains.
In 2022, sterling’s sharp fall against the dollar cushioned UK investors from some of the losses in US markets.
Currency hedging can reduce the effect of exchange rate fluctuations, but it comes at a cost and is not always desirable.
Overseas bond holdings are often hedged back to sterling, because currency swings can easily overwhelm the relatively modest returns bonds provide.
Equities are more often left unhedged, since currency movements tend to matter less over long periods and can add a useful layer of diversification.
Investing across the world, in thousands of companies and multiple currencies, adds real complexity.
That is where professional management can really help you meet your investment goals.
Assessing fund managers and companies in unfamiliar markets, with different accounting standards and governance cultures, requires specialist resources and experience.
Deciding how much to hold in the US, and in its largest technology companies, is a deliberate judgement rather than something to leave to the index by default.
Whether, when and how much to hedge depends on the asset class, market conditions and your own objectives.
Overseas investments can bring withholding taxes, dealing costs and other frictions that you need to manage efficiently.
Global conditions change quickly. Portfolios need regular review to make sure the balance between UK and overseas assets still suits your goals and attitude to risk.
There is no single ‘magic number’ or percentage of your portfolio which you should invest overseas.
Appropriate allocation will always come down to individual circumstances and will depend on a number of factors including:
The shift overseas reflects how the world economy has changed with the UK now a relatively small part of global equity markets.
Global investing provides access to companies, industries and economies unavailable through a UK-only portfolio.
However, overseas investing introduces additional risks, particularly currency and concentration risk.
And as with any investment, a portfolio including overseas investments has to be constructed in a way that reflects your objectives and circumstances.
If you’re unsure how much of your portfolio is invested overseas, or whether its balance of UK and international investments is appropriate for your circumstances, talk to a financial adviser.
They can help you understand your current exposure and consider whether it remains aligned with your goals.
Get in touch with an adviser today to find out more.
Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. The value of investments can go down as well as up and you may not get back the full amount you invested. Past performance is also not a reliable indicator of future performance. Always seek professional advice before making financial decisions.
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Because the UK represents only a small proportion of global equity markets. Investing internationally can give UK investors access to companies, sectors and economies that are less represented in the UK market, while potentially reducing reliance on the performance of a single country.
The main potential benefits include greater diversification, access to a wider range of companies and industries, exposure to different economies and access to growth opportunities outside the UK.
However, overseas investments also introduce additional risks, including currency, political and regulatory risks.
Overseas investments can be affected by currency movements, political and regulatory changes, different accounting standards, market conditions and geopolitical events. Global portfolios can also become concentrated in particular countries, sectors or companies.
Home bias is the tendency for investors to hold a larger proportion of investments in their domestic market than its share of the global investment market would suggest. A UK investor who holds significantly more UK shares than the UK’s global market weighting is an example of home bias.
Currency movements can increase or reduce the return a UK investor receives from an overseas investment. If the pound strengthens against the currency of the investment, the sterling value of the investment can fall relative to its value in the foreign currency. A weaker pound can have the opposite effect.
There is no single ‘yes’ or ‘no’ answer. Currency hedging can reduce the effect of exchange-rate movements but introduces costs and does not necessarily suit every investment. The approach can also differ between asset classes; for example, currency hedging is commonly considered differently for bonds and equities.
There is no universal percentage that is appropriate for every investor. The appropriate allocation depends on factors including objectives, investment timeframe, attitude to risk, capacity for loss and the other assets already held.
Many modern pension portfolios use globally diversified funds, meaning they invest according to the size and opportunities of global markets rather than focusing primarily on UK companies. The UK’s relatively small share of global equity markets means this can result in substantial overseas exposure.
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