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Fund Spy

How Exposed Is Your Domestic Portfolio to Overseas Revenue?

From domicile to revenue.

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An Evolution in Investing
Investing at home and abroad has changed considerably within the lifetime of most Morningstar readers. The U.S. asset manager Capital Group, which helped pioneer international investing, did not make its first overseas investment until 1954, and only a few others had done the same by the mid-1970s.[1] Holding stocks of companies domiciled outside of North America has since become commonplace. At year-end 2017, for instance, the large-growth Morningstar Category median for actively managed funds’ non-U.S. exposure was 4.6%, and nearly 70 funds out of 350-plus had at least 10% of their assets in non-U.S. stocks.

Yet, the significance of where a company’s headquarters are located has changed, too. In the past, a company’s revenue sources had closer geographic ties to its domicile, both nation and region. In that respect, a U.S. investor could use the percentage of assets held in foreign firms and their location to gauge a fund’s country-risk exposures. With many businesses’ operations now spanning the globe, the link between domicile and revenue is less prominent. Indeed, companies within the S&P 500--a popular bellwether for U.S. stocks--receive in total about 38% of their revenue outside the United States, including 14% from Europe and roughly 8% from China.

Alec Lucas does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.