Your "Global" Fund Is Mostly American
Pull up the factsheet for any global index tracker sold in the UK — the Vanguard FTSE Global All Cap, the iShares MSCI World ETF, the HSBC FTSE All-World Index — and find the country breakdown. The US allocation typically sits between 62% and 70% of the fund. If you hold one of these trackers and consider yourself internationally diversified, you are, in practical terms, a majority-American investor with some rounding-error exposure to Japan, the UK, France, and roughly two dozen other markets.
For fifteen years this was an extraordinary winning bet. But concentration that worked historically is not the same thing as concentration that makes sense going forward.
Why the Numbers Are So Lopsided
Global index funds are market-cap weighted — they hold every country proportional to its total stock market value. The US market has ballooned relative to the rest of the world, partly because American companies genuinely dominate global sectors and partly because they trade at significantly higher valuations than comparable businesses elsewhere.
The MSCI World index, the benchmark underlying most "global" funds sold to UK investors, contained 23 developed countries. The US accounted for roughly 73% of it as of early 2026, compared to around 48% in 2000. The UK, despite being the second-largest economy in Europe, sits at about 4%. A separate point that surprises many investors: MSCI World excludes emerging markets entirely. Any exposure to India, China, Taiwan, or Brazil requires either a separate EM tracker or an all-world fund such as the Vanguard FTSE Global All Cap.
The Valuation Gap Is Near Historic Extremes
The cyclically adjusted price-to-earnings (CAPE) ratio for the S&P 500 was above 35 in May 2026. The CAPE for UK equities (FTSE All-Share) sits around 14–16. European equities broadly trade at 17–20 times. CAPE is not a timing tool — markets can sustain elevated valuations for years — but a gap this wide does imply that the expected return from US equities over a ten-year horizon is almost certainly lower than from international peers.
Vanguard's own published capital market assumptions from late 2025 projected annualised returns of 6.5–8.5% for non-US developed market equities over the coming decade, versus 3.5–5.5% for US equities. These are probabilistic ranges, not guarantees, but the direction of the gap is consistent across most major fund managers' published forecasts. An investor holding the market-cap-weighted global index is, by definition, holding the most of the most expensive thing.
Three Practical Ways UK Investors Can Rebalance
- Add a dedicated international fund alongside the global tracker. The iShares Core MSCI Europe ETF (IMEU) gives clean exposure. Holding roughly 70% global tracker and 30% IMEU brings the implicit US weight down from around 67% to approximately 47%.
- Switch to a fundamental-weight variant. The Invesco FTSE RAFI All-World ETF weights holdings by book value, dividends, and cash flow rather than market cap — its current US allocation is around 38%, much closer to the US share of global economic output. Annual charge is 0.39% versus 0.12% for a standard tracker, so the premium is real.
- Add an emerging markets fund. The iShares Core MSCI Emerging Markets IMI ETF (EMIM) costs around 0.18% and gives exposure to China, India, Taiwan, and South Korea. CAPE valuations in EM are dramatically lower than in the US, with corresponding higher expected long-run returns and higher near-term volatility.
None of these moves requires selling existing holdings. New contributions directed into the non-US allocation gradually shifts the portfolio weight over time without crystallising a capital gains tax liability on holdings outside a tax wrapper. Inside a SIPP or ISA, you can rebalance freely.
The Counterargument — and Where It Holds
The strongest defence of pure cap-weighted exposure is that it is genuinely passive. You don't need to predict which region outperforms; the index shifts automatically as market values change. For investors who don't want to think about this further, a global cap-weighted tracker beats stock-picking and expensive active management in almost every scenario. Staying cap-weighted is a real decision — just not an obviously wrong one.
Where the argument weakens is for investors with a UK-centric life: UK income, UK mortgage, UK pension obligations. Adding 65% US equity exposure introduces currency risk that the passive framing can obscure. If sterling strengthens against the dollar over your investment horizon — entirely plausible at current dollar/pound levels — your US equity returns denominated in sterling are lower than the underlying dollar returns.
The simplest version of all this: check the country breakdown on your global fund today. You may be comfortable with 65% US exposure. You may not be. Either way, it should be a deliberate choice.