How AJ Bell’s Investments team views regions around the world

Spreading your investments around the world is a popular strategy, but many investors choose to do this solely through a global index fund. It’s not a bad start; however, it might not be offering the broad exposure you’d expect.

These funds tend to be weighted heavily towards the US, often with 60% to 70% of assets in that part of the world, and they don’t always include countries that are emerging markets.

We create our own regional allocation for the AJ Bell funds, which is quite different from what’s offered in a typical index tracker. Here are our current views on each region, and the weightings in the AJ Bell Global Growth portfolio.

Investing in the US

The US is a popular place for investors to head for a mix of growth stocks and established companies, ranging from tech names like Nvidia and Apple to food and drink giants such as McDonald’s and Coca-Cola.

Because the US contains some of the world’s largest companies, many global indices have a large amount of their allocation in this part of the world. We tend to invest less in this region, with North America accounting for 23% of the AJ Bell Global Growth fund portfolio.

The region has large exposure to a small number of companies, such as Nvidia, Microsoft, and Apple. These names are closely tied to the AI theme, so they don’t offer much in the form of diversification. We want to spread risks more widely, and earlier this year we increased our US allocation to more a diverse range of sectors such as utilities, healthcare and energy.

The Global Growth fund has also started to increase holding in equal-weighted US indices, meaning that each company in the index is given the same allocation, rather than it being decided by their market value.

While many US shares trade on higher valuations, corporate earnings growth has been good, in general. It’s the only region where we’ve really seen this trend. In other places, the companies have performed about the same over the year, while prices have gone up.

For example, the S&P 500’s PE ratio throughout 2025 increased just slightly, from 21.5 at the beginning of 2025 to 22.5 at the end, according to Refinitiv. The UK's FTSE 100 PE ratio increased from 11.2 to 13.2 in 2025, and MSCI Europe ex-UK increased from 14 to 15.9.

In the US, this price rise has been backed up by the numbers. And other companies in the US, such as Micron and Intel, are jumping on the AI theme and making large gains.

Emerging Markets ex-China

Emerging markets excluding China is full of names involved in producing components for the tech industries such as Taiwan Semiconductor Manufacturing Company (TSMC).

This part of the world has been the best-performing investment region globally this year. Most of this growth has come from a select number of companies throughout Korea and Taiwan which are essential to the AI production process.

TSMC’s shares have gone up 129% over the past 12 months and up 283% over five years. While Nvidia still beats that performance on a five-year basis, up 1,070%, in the past year it’s grown by ‘only’ 46%.

TSMC has been around since 1987, but in more recent years, it’s become the primary chip manufacturer for companies like Nvidia. Last year, the company’s senior vice president revealed that 99% of the world’s AI accelerators (the chips used for computation) are made by TSMC.

In South Korea, SK Hynix has been the big hitter, growing its share price by 957% in the past year, and 1,688% in five years. SK Hynix has proved indispensable to its customers, such as Nvidia, as it creates data storage which is in high demand.

While we are underweight (have less exposure versus the broader market) in the US compared to peers, we are overweight (have more exposure) in emerging markets excluding China, at 20% for the AJ Bell Global Growth fund.

There are some worries that the market is too heavily reliant on a small group of companies. One reassuring factor is the role these companies play in the AI process. Because they operate as manufacturers, they aren’t taking on the same AI capital expenditure risk as the US companies, such as Meta and Alphabet, the parent company of Google. They are essential to the process and have few peers with the same capabilities.

Europe

Investors are often drawn towards Europe because valuations have historically offered a discount to other regions, despite the global nature of major companies.

It also offers mix of sectors, some which can be more defensive, such as healthcare, and others that can be more cyclical such as financial services or industrials.

In 2025, Germany decided to increase spending on defence, infrastructure and renewable technologies. This narrative flip brought investors flooding back to the region and made it one of the better performing regions throughout 2025.

It has underperformed recently, which reflected concerns by investors around the Iran war. Europe relies on energy imports which means a higher oil price caused by the Middle East crisis has weighed on investors’ minds in recent months.

We decreased our allocation to Europe in the AJ Bell Global Growth fund in January, having captured the positive returns in 2025 well. It is still a useful diversifying region in portfolios but not offering the opportunities it once did.

UK

The UK is a popular place for investors to look for diversity, and companies that have weathered market storms of the past. It also has companies with international reach, meaning their success isn’t only dependent on the UK economy.

Even investors who are excited about AI seem to have a degree of worry. This has led many to build safety nets by reducing their US exposure and redeploying money into other markets, such as the UK. Tech only makes up around 2% of the FTSE All Share, while financials account for 30%, and industrials, consumer staples and healthcare account for 12% each, as of the end of May.

These sector diversification benefits are one reason why the UK makes up 23% of AJ Bell’s Global Growth fund in 2026, our highest regional equity weighting.

The UK market is diverse not only in sectors but gives access to some very large global companies who generate their earnings from multiple countries around the world. These include companies like HSBC, which has a large amount of its business in Asia, and Shell, which makes most of its revenue in Asia and Africa.

Japan

Japan has held a niche in the tech market since the 1970s, with companies you'd recognise in your home like Sony and Nintendo. Although it’s much more established than the tech exposure found in emerging markets, it’s undergoing change at a political and industry level.

Japan makes up 8% of the AJ Bell Global Growth fund. The country is being heavily influenced by political changes in both positive and negative ways. Japan sources over 90% of its oil from the Middle East, so it remains vulnerable to the US-Iran war. However, politics at a national level are powering the market forward.

One government initiative has been for corporates to share profits more evenly. That fed into higher real wage growth and consumption before the Iran war, helping shift Japan’s growth model away from pure exports. In addition, the Tokyo Stock Exchange has undergone reform by pushing for companies trading below their underlying book value to improve capital efficiency. Firms are increasingly being called out and required to publish plans to lift valuations, creating a step change in accountability.

This sits alongside broader governance reforms, which are actively encouraging independent directors, better disclosure and decision-making that’s focused on shareholders. The results are becoming visible. Companies such as Toyota and Sony have stepped up share buybacks and capital allocation discipline.

China

China represents a different growth opportunity for investors as the competing world superpower with the US. The tariff wars between the countries have meant that China increasingly has its own technological innovations, including electric vehicles and AI, instead of being a piece of a global system.

China also represents 8% of the AJ Bell Global Growth fund. Many managers lump China in with other emerging markets, but we have a separate allocation which affords us more flexibility.

This has been helpful so far this year, as the picture hasn’t looked as positive. China remains vulnerable to trade uncertainty, especially with the US, and some of its largest players like Tencent have struggled of late.

Despite this situation, 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.

The signs of positive change are promising, but trade and business fundamentals remain significant barriers, leading the AJ Bell team to remain cautious for now.