Can fund managers really ignore where the companies they invest in are based?
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Global equity fund managers will often argue that it doesn’t matter where a company is listed; all that matters is that they are buying the best companies available regardless of where in the world they happen to be.
This has logic. Large companies are often global in nature and generate revenue from both inside and outside of their domestic market.
The UK’s FTSE 100 is a good example of this, where upwards of 70% of its constituents’ collective revenue is generated outside of the UK.
Translating that to a portfolio and the STS Global Income & Growth Trust, which can invest in any stock market in the world, has 33% invested in London-listed companies, but only 8% of the overall revenue comes from the UK.
“When I was investing in the 1990s, people would spend hours debating whether to add 2% to Europe or take 2% out of Japan or whatever it might be. But investing purely on a geographic basis like that doesn’t make much sense. “What you should be thinking about is where businesses make money,” says STS’ lead manager James Harries.
What’s behind a shift in fund manager thinking?
Part of this shift in global managers’ general approach is that since the 1990s, as Harries mentioned, stock markets have become much more global. The explosion of the internet is just one development which has made it much more straightforward to run a business with a global reach.
The shift in philosophy is also part of managers’ efforts to drown out the ‘noise’, by which they mean the headline, news grabbing events which can fuel short-term thinking and fog the long-term investment picture they’re trying to focus on. Being more ambivalent about their regional exposure reflects this thinking.
But that only works to a degree. Because while almost all active fund managers will press the point that they are driven by the bottom-up, stock specific fundamentals of what makes Company A better than Company B to invest in, sometimes its location will tip the scales.
“It’s the sort of thing that doesn’t matter until it does,” says AJ Bell’s Head of Investment Solutions James Flintoft.
“Most fund managers will tell you it doesn’t really matter because they’re looking for the best opportunities globally. And then suddenly when, say the Italian election rolls around and Italian stocks are up and down all over the place, or the euro is in crisis it suddenly matters that your fund is invested there,” Flintoft explains.
A recent example of this was in 2025 when the idea of US exceptionalism was challenged by President Trump’s Liberation Day tariffs, which led to a deliberate move by active managers to shift some of their investments out of the US and into Europe. Between one day and the next, nothing had changed about those companies other than the political, economic and sentiment backdrop of the countries that they were listed in.
“I’m a big believer that a macro-overlay is a useful lens,” says Flintoft.
The AJ Bell investment team, which Flintoft is a part of, do consider a company’s headquarters and listing venue when investing because this helps avoid major concentration risks and sometimes, they do want to exposure to specific macro-economic drivers in different areas.
For example, China represents 8% of the AJ Bell Global Growth fund and Flintoft explained in the team’s latest quarterly review, that “China has had some positive economic boosts, building up its own technology capability and looking stable as a large-scale economy in comparison to erratic decisions from the US. Some parts of the market, like electric vehicles, have taken off as demand has risen from drivers in Europe following the start of the Iran War”.
Choosing what to avoid
It isn’t only a case of choosing which macro-economic drivers you want to be exposed to but also, what risks a manager might want to avoid in their fund.
Jumping back to 2016 when the result of the Brexit vote surprised many people, the UK market was handed a higher risk premium overnight by the market as it became tainted by the main thing investors fear: uncertainty.
James Thomson, manager of the Rathbone Global Opportunities fund, deliberately reduced the fund’s UK exposure directly because of Brexit-related concerns.
Prior to the referendum, the Global Opportunities fund had 24% invested in the UK and by 2018 this was just 4%. Today, it’s back up to almost 8%, but still a long way from the pre-2016 level.
Indeed, the UK stock market has been unable to shake off its ‘unloved’ status among global investors for the past decade, due to a long list of market wobbling events.
Brexit followed by years of political instability and change at a time when tech stocks have dominated stock market returns and investor appetites; a sector in the UK is light on.
Looking purely at bottom-up fundamentals, many argue that the UK has proven quality businesses at historically low valuations, but global managers aren’t buying them partly because of where they’re based.
Experts in the field
Another consideration for global equity managers is that while they can partake in any market, often what gives them that ability to find the best companies is deep, qualitative research.
Paul Angell, Head of Investment Research at AJ Bell, discussed in a recent Deep Dive edition of the AJ Bell Money & Markets Podcast how having a footprint in the same area as the companies you’re investing in can make a big difference.
This is because, while the trading information of any public company is available equally to all and you can have a meeting with a representative virtually or take a passing visit when you’re in the same area, “you kind of understand the politics a little bit more” with boots on the ground. “You understand the direction of travel and the local markets,” he explained.
Sticking with the Rathbone fund, and while Thomson and his deputy manager Sammy Dow have come back around to the UK, they deliberately avoid investing in emerging market (EM) equities.
Dow explains that while the pair are always looking for the best companies, some of which he admits “may well be in emerging markets” they chose not to directly invest in EM “firstly, as we don’t feel we have the expertise to invest in those markets”, as Angell was discussing.
“That is partly due to geography, in terms of our ability to meet regularly with management, which is a crucial part of our process. Another part is language, in terms of our ability to interact clearly and concisely, with the risk of key information being lost in translation.”
This extends beyond emerging markets too. “Partly it is market structure with, for example, Japan being home to many more conglomerates, rather than our preferred pure play businesses,” Dow explains.
“Allied to that, we feel we have more than enough scope to gain exposure to emerging market revenue and profit growth through developed markets listed businesses, where you have the added reassurance of long established and trusted corporate governance criteria and a more level playing field.”
Eve Maddock-Jones: Funds and Investment Trust Writer
Eve joined AJ Bell in 2026 as a funds and investment trust writer. She was previously editor at Investment Week, reporting on all major retail investor news, covering funds and investment trusts, ETFs and regulation...
