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Sensible ratio UK to non-UK trackers

Posted: December 9th, 2016, 10:35 pm
by monstermixer
Hi,

I have a pension which I've currently got invested 82% in an unhedged non-UK tracker and 18% in UK FTSE all share tracker.

However, I want to move some money to a currency hedged tracker as I believe Sterling will rally over the medium-term. The problem is that the only tracker I have available to me through my company auto-allocates money 70:30 non-UK to UK investments.

This sounds way-high to me, unbalanced towards UK - what are your thoughts? I would have thought 80:20 was the appropriate ratio these days, but I was wondering how others have allocated their investments geographically?

I was thinking to actually split the funds 50% in the currency hedged, 5% in the UK tracker and 45% in the unhedged non-UK tracker instead to keep an 80:20 ratio.

Thanks

Re: Sensible ratio UK to non-UK trackers

Posted: December 10th, 2016, 11:47 am
by GeoffF100
We have a recent thread on this topic:

viewtopic.php?f=55&t=380

Re: Sensible ratio UK to non-UK trackers

Posted: December 12th, 2016, 11:00 pm
by Hariseldon58
Given currency movements are very hard to predict perhaps you might just go with the flow....The world as a whole is very unbalanced towards the UK, thats a question of geography and hard to argue with. The argument is that your spending is geared toward the UK but a world equity tracker in foreign exchange has a lot going for it, a global bond tracker though tends not to reward the currency risk.

Re: Sensible ratio UK to non-UK trackers

Posted: December 13th, 2016, 11:26 am
by monstermixer
Yes agree currency movements are very hard to predict, but I'm basing it on my own reading of Brexit and that I believe we won't really leave the EU (well we'll have something called Brexit, but effectively it will maintain the status quo).

Re: Sensible ratio UK to non-UK trackers

Posted: December 13th, 2016, 6:51 pm
by GeoffF100
I hope you are right, but it is a big gamble. I have a long term plan to increase my overseas equity holdings, but I am not going to not do it all at once.

Re: Sensible ratio UK to non-UK trackers

Posted: December 13th, 2016, 7:27 pm
by scrumpyjack
Most of the big 'UK' companies are in fact global businesses with well over 75% of their business overseas, so to classify them as UK is very overly simplistic. Many of the bigger ones account and declare dividends in Dollars or Euros inspite of being supposedly UK companies.

So the allocation you refer to is not as overweighted to the UK as it may at first sight appear.

Re: Sensible ratio UK to non-UK trackers

Posted: December 13th, 2016, 9:21 pm
by Lootman
scrumpyjack wrote:Most of the big 'UK' companies are in fact global businesses with well over 75% of their business overseas, so to classify them as UK is very overly simplistic. Many of the bigger ones account and declare dividends in Dollars or Euros inspite of being supposedly UK companies.

So the allocation you refer to is not as overweighted to the UK as it may at first sight appear.

There is more to investing overseas than just where the earnings are on a lookthrough basis.

Things like tax risk, regulatory risk and political risk could affect just the UK while not really affecting overseas competitors. A Corbyn government could hurt BP, Glaxo and Barclays, while not affecting Exxon, Merck and Goldman Sachs.

Re: Sensible ratio UK to non-UK trackers

Posted: December 14th, 2016, 10:28 am
by hiriskpaul
Lootman wrote:
scrumpyjack wrote:Most of the big 'UK' companies are in fact global businesses with well over 75% of their business overseas, so to classify them as UK is very overly simplistic. Many of the bigger ones account and declare dividends in Dollars or Euros inspite of being supposedly UK companies.

So the allocation you refer to is not as overweighted to the UK as it may at first sight appear.

There is more to investing overseas than just where the earnings are on a lookthrough basis.

Things like tax risk, regulatory risk and political risk could affect just the UK while not really affecting overseas competitors. A Corbyn government could hurt BP, Glaxo and Barclays, while not affecting Exxon, Merck and Goldman Sachs.


Indeed. I would also add that a significant bounce back of the pound will hurt the pound value of the earnings/assets of UK listed global businesses every bit as much as those listed overseas. When/if that happens, the market prices of those companies will adjust accordingly.