Despite concerns over the short-term impact of Brexit on their portfolios, UK investors’ assets are heavily weighted towards the UK market. New research from Charles Schwab shows that UK investors are put off investing in other markets such as the US due to risks arising from geopolitical tensions. UK investors are also hesitant to invest in equities due to perceived risk and volatility and a nervousness around the complexity of the asset class.
Schwab’s poll of 201 UK investors with a minimum of £25,000 in disposable assets found that 74% are looking to invest the majority of their assets in their home market. Only 7% are looking to make significant investment into the US. The fact that nearly one in ten investors did not know or were unsure of their favoured markets demonstrates how little investors are considering foreign equities compared to their own.
When asked why they were attracted to investing in their home market, a significant proportion of investors (48%) said that they feel most informed about companies in their own market and 39% feel that they understand the dynamics of their domestic economy better than others. As further confirmation of the ‘Home Bias’ issue, nearly three quarters (74%) of respondents agree that there is long-term value in investing in the UK market, compared to 56% who say there is long- term value investing in the US market.
Kully Samra, Vice President of Charles Schwab,said: “UK investors have a strong tendency towards Home Bias and are clearly more comfortable allocating money to economies and stocks with which they are immediately familiar, even if the data suggests there may be better returns elsewhere. The US stock market is a prime example: the S&P 500 has by far outperformed the FTSE 100 over the last few years, so this UK favouritism demonstrates how UK investors are actually weakening their portfolios and cutting themselves off from potentially superior returns.”