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Vanguard is cutting exposure to UK stocks and bonds in its £52bn LifeStrategy fund range despite a broader government push to encourage investment in domestic equities.
The world’s second-largest asset manager said on Thursday it would reduce the funds’ UK equity allocation from 25 per cent to 20 per cent. UK bond exposure will also be cut to from 35 per cent to 20 per cent.
Vanguard’s decision to reduce exposure to UK securities comes as domestic investors “become more comfortable with global diversification”, the group said. The LifeStrategy range includes five funds that provide exposure to a mix of stocks and bonds to suit different risk appetites.
Vanguard said it continued to have “strong conviction in the UK” as part of a diversified portfolio, adding: “On the behalf of our clients, we invest more than £140bn in UK-listed equities and manage around £220bn in UK‑domiciled funds.”
The changes will be implemented in phases from the end of March until June.
The move comes despite the UK government’s attempts to encourage more domestic investors to put money into London-listed equities and funnel more cash into the economy.
Vanguard is among 19 financial firms to have agreed to fund a UK government-backed campaign aimed at encouraging people to invest, which is set to be launched in April.
The UK equity market has come under pressure in recent years as British pension funds and institutions reduce their exposure to domestic share holdings to invest more in global stocks. The UK accounts for less than 4 per cent of the MSCI World index.
The reduction to UK securities across the LifeStrategy range amounts to about £1.85bn, or 1.3 per cent of the total UK equity allocation that Vanguard makes on behalf of clients globally.
In addition to the allocation changes, Vanguard is cutting fees from 0.22 per cent to 0.2 per cent from January 27. The reductions are estimated to return more than £10mn to UK investors and follows £16.5mn in fee cuts made to Vanguard’s European ETF range last year.
Vanguard has also launched a new range called LifeStrategy Global, which comprises five funds for investors who want their money invested fully across global markets, without giving extra weight to the UK.