• The US accounts for 71.9% of the MSCI World index, while 10 of its largest companies make up more than a quarter of its market capitalisation. 
• This market now looks expensive in aggregate and some of the largest index positions may be about to face a new set of headwinds.
• There are abundant investment opportunities in the US – particularly among the beneficiaries of AI spending – but you are unlikely to gain sufficient exposure to them through a passive North American or global fund.

It has been difficult to argue against the case for a fire-and-forget investment in a global passive fund over the past 15 years: the MSCI World index is up by 475.6% over this time, equivalent to annualised returns of more than 12%.

Driven by a handful of US tech companies generating profits and cashflows on a hitherto unimaginable scale, few active managers have been able to deliver returns anywhere close to this figure.  

One of the only ways to beat the global market over this time would have been to take a more concentrated view on the US, with the MSCI North America index up 648.3% over the same period. 

But as you are no doubt tired of hearing, past performance is not a guide to future returns.  

The US now accounts for 71.9% of the MSCI World index, while 10 of its largest companies make up more than a quarter of the market capitalisation. Eight of these are concentrated in the tech industry.  

Hence, putting all your money in a global tracker fund doesn’t just mean you are overexposed to a single sector in a single country, it means you are betting exactly the same investment trends that defined the post-Global Financial Crisis era will continue to run in perpetuity.  

There are four main reasons why we don’t think this will be the case.