Vanguard LifeStrategy Lowers UK Stock and Bond Exposure in Rebalance

Key Takeaways

• Vanguard says the move is designed to “reduce home bias” for UK investors and improve diversification.
• The changes to UK exposure come as Vanguard lowers costs and launches LifeStrategy Global.
• The average UK multi-asset fund has seen a steep and steady reduction in “home bias” over 15 years.

Asset manager Vanguard has announced a rare allocation change for its £52 billion LifeStrategy multi-asset fund range by lowering the proportion of investments in UK assets.

Within each fund’s stock allocation, Vanguard will reduce UK equities from 25% to 20% of total equity, and on the bond side it will move from a 35% allocation to UK bonds to 20% of total bond exposure. For stocks, this is still above the category average for multi-asset funds, but below the average fixed-income allocation.

Vanguard says the move is designed to “reduce home bias” for investors and increase diversification with global equities and global bonds.

The changes will be phased in between March 27 and the end of June 2026.

Vanguard will also lower the funds’ ongoing charges figure from 0.22% to 0.20% from Jan. 27, aiming to ensure they stay competitively-priced with other low-cost multi-asset peers.

What Is Vanguard LifeStrategy Global?

At the same time, Vanguard has expanded its menu for UK investors by launching LifeStrategy Global, which operates along similar lines to the original LifeStrategy, but invests with global market weights and avoids any UK bias.

This means it holds only about 3% of equity assets in UK stocks, and 4% of its bonds in the UK. This could appeal to a different cohort of investors who prefer greater global diversification, like those who have backed the more globally-diversified £13.7 billion HSBC Global Strategy fund range. The latter also uses cheap passive building blocks but takes a more active approach to its allocations.

Why Is Vanguard Reducing UK Exposure in LifeStrategy?

Although it doesn’t make frequent allocation changes, Vanguard regularly reviews LifeStrategy’s asset allocation with a long-term lens. It says that its view on the optimal allocation to UK shares and sterling-denominated bonds has changed, and cites the benefit of increased diversification from more global stocks and global bonds.

However, its allocation choices also happen in the context of local investor preferences and requirements.

When the Vanguard LifeStrategy funds were launched in the UK in 2011, they initially held all their fixed income exposure in UK bonds, and 35% of their equities in the UK, until early 2014 when overseas bonds were introduced, and home bias moved to the level that has prevailed until now.

What the UK Allocation Cut Means for LifeStrategy Investors

For existing LifeStrategy investors, the changes won’t dramatically alter the character of the funds, but they will tilt portfolios slightly further overseas. UK equities and sterling bonds will still play a meaningful role, just a smaller one than before. In practice, that means greater exposure to global markets, particularly the US and other developed economies, and potentially more currency movement within returns.

The fee cut is incremental rather than transformative, but it reinforces LifeStrategy’s position as a low-cost core holding. Investors who prefer a more globally neutral approach may also find the new LifeStrategy Global range better aligned with their preferences, especially if they are looking to minimise home bias altogether.

How Has UK Home Bias Changed Over Time?

Meanwhile, the average UK multi-asset fund has seen a steep and steady reduction in home bias. The chart below shows the medium-risk GBP allocation 40-60% equity category, which is home to the Vanguard LifeStrategy 60% Equity fund. It illustrates the steady decline in the category average allocation to UK equities and UK fixed income, shown here as the UK’s percentage of total equity, and total fixed income, respectively. Average UK equity has fallen from almost 60% to about 17% of total equity exposure, and UK bonds from about 55% to 30% of total fixed income exposure.