Hargreaves laments 'insular' UK investors

Hargreaves laments 'insular' UK investors
Peter Hargreaves, co-founder of Hargreaves Lansdown and chairman of Blue Whale Capital

The co-founder of Hargreaves Lansdown has lamented the fact British investors are too "insular" and allocate too much of their portfolios to the UK.

Peter Hargreaves said that in particular UK investors may be able to benefit from allocating more to US stocks, saying this was typically the a common area of weakness for most portfolios.

Writing in his most recent blog, the co-founder and chairman of Blue Whale Capital said long-held concerns about the expensive share prices of US companies may be something foreign investors have to simply contend with.

Hargreaves said: "I am pretty sure that almost all British investors will have substantially less than 50 per cent of their portfolio in America.

"There is no argument that it is prudent for investors with sterling liabilities to have the majority of their assets in sterling assets.

"We wouldn’t advocate holding 100 per cent in American stocks. However, there has been an increase in globalisation, and we should be less insular in our investment outlook.

"The one area of weakness in portfolios is probably too little in the US."

He acknowledged it was true that American shares have usually looked more expensive than British ones, but but he said this may be "well justified". 

Hargreaves said: “The American consumer market is six times bigger and the American economy nearly eight times bigger than Britain’s. American companies can therefore grow faster and probably warrant higher valuations – especially as many of them also compete and dominate within their industries on a global scale.”

Many analysts and fund managers have expressed concerns about the perceived frothiness of US shares.

However, Mr Hargreaves argues the quality of US stocks – and the size of the market they offer access to – means they warrant a place in portfolios.

“While pundits’ attitudes remain sceptical about valuations in American companies, I would venture that stock markets are no different than almost everything in life. Quality does cost more but is invariably worth it (as long as you do not over-pay),” he wrote.