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Problems with limiting investments to domestic markets

 

Limiting 'home bias' is important when it comes to pension portfolios, Mark Fawcett has warned.

The chief investment officer for NEST told FTAdviser how maintaining significant overweights in portfolios towards the domestic UK market could pose potential problems for investors.

He said: "Some DC default funds may have as much as 50 per cent of their equity allocation invested in UK stocks.

"However, this places big bets on certain sectors - the UK market is characterised by an an over-representation of a handful of sectors including banks, as well as oil, gas and mining companies."

Instead, he advocated maintaining a portfolio which is globally diversified, not just by country but also by asset class, to avoid correlation risk within the portfolio.