Global equity funds vs UK equity funds – how do they compare?

Often UK investors own multiple funds that focus on the more familiar UK market rather than those that invest around the world. 

It’s partly a legacy from when the UK was a more prominent and diversified global market, reflected by the large number of funds available. There are 167 funds on offer to retail investors in the Investment Association UK All Companies sector compared with 285 in the equivalent global sector, despite the UK representing only around 4% of world markets.

So how should investors think about their UK exposure, and how should they balance it with global funds given the different opportunities and risks?

What are UK equity funds?

A UK fund mainly invests in companies listed on the London Stock Exchange. These can range from household names such as Tesco, Vodafone and BP through to smaller, domestically focused businesses.

It’s important to keep in mind that the UK market is not the same as the UK economy. Most of the ‘large cap’ companies making up the majority of the FTSE 100 are international businesses and on average over three quarters of their earnings are derived from overseas. Further down the size spectrum the picture is a bit different. Many smaller and medium-sized companies are more domestically orientated and more dependent on the fortunes of the UK economy.

Some UK funds are therefore more influenced by the health of the UK than others. Those focused on larger, international businesses – including many tracker funds that aim to invest to match the performance of the index – are typically less exposed. However, many actively managed funds invest more heavily in smaller businesses where there is greater reliance on economic growth, consumer spending, business investment and political developments.

What about UK equity income funds?

The UK is also particularly attractive for income seekers, with sectors such as banking, energy and consumer goods important sources of dividend payments. UK equity income funds, housed in a different fund sector, target these to provide a regular income stream to investors. 

Whether investing for dividends or total returns (income and capital growth) from the UK market, it’s important to bear in mind that there is often less diversification than a global fund. Performance depends heavily on one market that is not only shaped by one set of economic and political developments, but is also skewed to certain sectors such as energy, commodities and financials. 

The UK market has also largely missed out on the huge rise in technology stocks over the past decade with even UK-based tech companies such as ARM Holdings choosing to list in the US. It is therefore often characterised as an ‘old economy’ market where valuations are reasonable and dividends attractive, but growth potential is frequently more limited. 

Over the past decade, the average UK fund has turned £1,000 invested into £3,233, including income reinvested, but the average global fund has eclipsed this, growing to £4,784. Interestingly, it is much closer over recent years, with both averages around 40% higher over three years to the end of July 2026 (Source: FE Analytics). Past performance is not a reliable guide to future returns.

What is a global fund?

A global fund invests across multiple countries and regions, including the US, Europe and Asia. Sometimes emerging markets are included too. Global funds offer broad diversification and exposure to many of the world's leading companies, making them a strong foundation for many portfolios. 

As they draw from many different markets, global funds are generally less reliant on any single economic or political event, although UK investors should note that currency movements can affect returns, helping or hurting performance over certain periods.

Although global funds frequently offer broad diversification across economies, sectors and currencies, there is often a strong bias to the US market, where many of the world's largest and recently fastest-growing companies are based. That’s especially the case for global index trackers or funds focused on growth businesses. 

It might come as a surprise to some UK-based investors that each of the four largest companies in the MSCI World Index, Nvidia, Apple, Alphabet and Microsoft, are larger than the entire UK market (Source: MSCI). Clearly, it has been beneficial to back these companies in recent years as they have sustained exceptional growth rates from technological innovation. However, it has left global markets lopsided with such large weights in US tech giants, most of whom are tied to the build-out of artificial intelligence (AI). 

Many active managers are wary of putting too many eggs in the AI basket, especially if they prioritise characteristics such as resilience and value.  As such, there is considerable variety across the global fund sector, and with a huge pool of different opportunities across the globe, the geographic and sectoral make-up of funds varies greatly – as does their performance.

Meanwhile, global equity income funds offer access to dividend-paying companies around the world. For income seekers, this can provide greater diversification and reduce reliance on a handful of sectors or one country's economic fortunes – such as the UK. The trade-off is that broad global income funds may have lower headline yields, but that might translate to higher dividend growth in the long term.

Global vs UK equity funds – how can they be used in a portfolio?

Many investors use global funds as a core holding. The wide diversification can help reduce the impact of weakness in any one country or region. However, investors should take care that they are not inadvertently overexposed to US technology – for example, through only using global passive funds – if they are seeking to dampen volatility and provide a spectrum of sources of return.

UK funds can be used as satellite holdings to increase exposure to the domestic market, particularly if an investor believes UK shares are undervalued or wants additional dividend income.

Meanwhile, equity income funds can provide regular income through dividends paid by the companies held. These can either be core holdings in an income portfolio – especially diverse global funds – or provide diversification from index or growth strategies for investors focused on overall returns. Established businesses with strong cash generation and a track record of paying dividends can often offer some resilience during weaker market periods, although capital values can still fall and yields are not guaranteed.

Rather than viewing options as competitors, a good mix of global and UK funds, as well as pairing growth and income strategies, can create a well-rounded portfolio that meets a range of financial objectives.

Global and UK fund options from our Preferred List

With so many options available, it’s not easy to pick out a global or UK fund. To provide some inspiration for your own research, here are some options from the Charles Stanley Direct Preferred List – our compilation of fund ideas for new investment from our dedicated research team.

Remember, any investment you choose should meet with your own personal circumstances and objectives, taking into consideration your existing portfolio. Investment decisions in funds and other collective investments should only be made after reading the Key Investor Information Document or Key Information Document, Supplementary Information Document and Prospectus.

JOHCM Global Opportunities offers a balanced global share portfolio focused on durable businesses with strong balance sheets and consistent cash generation, which makes it worth considering as a core holding. It can work on its own for those leaning towards being a bit more conservative or alongside a passive strategy such as a global tracker fund or ETF such as Fidelity Index World or iShares Core MSCI World UCITS ETF.

The fund managers take a distinctive and disciplined approach to global investing. A concentrated and adaptable portfolio of just 25 to 40 stocks – where each holding can meaningfully influence returns – can result in performance very different to market returns from year to year, but we believe the manager’s focus on good-quality global companies with strong balance sheets could provide attractive long-term returns.

For a more adventurous, higher-risk approach, BlackRock Global Unconstrained Equity, recently added to the Charles Stanley Direct Preferred List, is highly focused on what the investment managers perceive to be the best growth compounders of the coming decade and beyond.

Run by a team led by Alistair Hibbert, who has a strong record in managing unconstrained global and European equity mandates, the fund dares to be very different to the benchmark index, often resulting in bumpy performance. Entire sectors can be shunned if they don’t offer stocks that fit in with the overarching philosophy of backing market leaders with competitive advantages, with starting valuation a secondary consideration.

Given the concentrated, higher-risk nature of the portfolio, stock and sector exposures will be very different from the benchmark and most peers. It is therefore better paired with one or two more mainstream or value-orientated strategies that would complement it as part of a core of global equity exposure. Alternatively, it could be a satellite position that looks to the stock-picking ability of the managers to add value over the longer term. 

For exposure to the UK, investors are spoilt for choice for UK funds and trusts. There truly are managers and strategies for all tastes. 

Man Undervalued Assets adopts a disciplined approach to value investing with an emphasis on financial strength. By focusing more on the current shape of the balance sheet, as well as cash generation and positive operating momentum, the portfolio managers target companies whose share prices do not fully reflect their ‘intrinsic’ value or those whose profit streams are undervalued by the market. Importantly, this should weed out companies likely to fall victim to shaky balance sheets.

Meanwhile, JOHCM UK Equity Income is a consideration for income investors or those who want to focus on dividend-paying companies. It has a strong yield discipline, an experienced UK equity team at the helm, and invests in smaller and medium-sized companies as well as the larger FTSE 100 stocks to provide more diversification than a typical UK equity income fund. 

The fund is available with highly preferential terms through Charles Stanley Direct. The annual management charge is 0.55% on the ‘S2’ units rather than the standard 0.625%, and there is no performance fee on top of the ongoing charges – for most of the units available on UK platforms this is 15% on excess performance over the FTSE All Share.