If you want to invest globally, invest in the FTSE.
If you listen to financial advisors or read much of the financial press out there, you'll often come across exhortations to diversify your portfolio, spreading your money across different markets around the world.
To achieve that, investment companies offer a bewildering array of global funds -- US, China, emerging markets, or whatever. Of course, all those foreign stock exchanges, companies, and accounting practices need more expertise to unravel, and so the funds have to levy high charges to pay for the required experts.
But what if we were to tell you of a simple UK-based fund, investing in a well-diversified range of companies that earn most of their money globally, and which you could have for an annual charge of less than 1%?
A truly global investment
How about if we tell you that the companies in the fund make more profit from Europe and the US than from the UK, that a full 83% of their profits are generated from outside the UK, and that half of its top flight companies earn hardly anything from the UK at all?
If that's not enough, what if we told you that some of its profits also come from Scandinavia, South America, Eastern Europe, India, the Far East, China, and other such far-flung places?
We bet that sounds like the kind of globally diversified investment that would suit you.
So what is this fund? You're probably getting close to working out that we're talking about a FTSE tracker fund. The attractions of the London Stock Exchange (the LSE) -- its regulatory regime, its transparency, its costs, etc -- make it the home to a large number of truly global companies.
Great global companies
As an example, BP Group (LSE: BP), a FTSE 100 company valued at over £100bn, is one of the world's major players in the oil and gas industry. But though listed in London, it generates only about 25% of its turnover and around 17% of its profits from the UK. Over half of its profits come from the "rest of the world", which is everywhere bar the US, UK and Europe.
Then there's fellow oil and gas giant Royal Dutch Shell (LSE: RDSB), for whom Europe contributes about half of its turnover and the US about a quarter, with the final quarter coming from that same old place again - the rest of the world.
And if we look closely at British American Tobacco (LSE: BATS), with a turnover in excess of £12bn a year, we find that it sells precisely none of its brands here in the UK.
The telecoms business is similar too, with leading mobile telephone operator Vodafone (LSE: VOD), which last year made profits in excess of £10bn, doing just 13% of its business in the UK, with 59% coming from the rest of Europe, and the remaining 28% from elsewhere around the world.
Want some Scandinavian exposure? How about the Anglo-Swedish AstraZeneca (LSE: AZN) then? Sales in the UK contributed only 6% to its turnover last year, with the Americas making up 50%.
Further-flung places
Or would you prefer some South American action? Try the Chilean mining giant Antofagasta (LSE: ANTO), with turnover in excess of £2bn and valued at £10bn. Or if its the antipodes you're after, the Australian miner BHP Billiton (LSE: BLT), with more than 60% of its turnover coming from the Asia-Pacific region, should fit the bill nicely.
And for more exotic sources of profits, there are companies like Cairn Energy (LSE: CNE), which makes all of its money in India and Bangladesh, or the African insurer, Old Mutual (LSE: OML).
83% overseas
In fact, of the £144bn in profits made by London-listed blue-chip companies last year, more than £120bn came from outside the UK, with some companies engaging in so little business in the UK that they classify it under Rest of the World.
This all goes to show what a waste of time it is following the FTSE to give you some idea of the performance of the UK economy -- in fact, between the last quarter of 2008 and the third quarter of 2009 when the UK economy contracted 5%, the FTSE 100 index rose 18%.
And it also shows why you don't need to pay high prices for fancy global investment funds, when there are great low cost FTSE trackers here on our doorstep.
More from Alan Oscroft
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