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Study reveals higher proportion of FTSE revenues derived overseas

Research by the Capital Group, which manages more than £750 billion of assets, has shown that more of the FTSE 100’s revenues are earned internationally than had previously been believed.

 
Study reveals higher proportion of FTSE revenues derived overseas

Research by the Capital Group, which manages more than £750 billion of assets, has shown that more of the FTSE 100’s revenues are earned internationally than had previously been believed.

Previous consensus estimates had held that two-thirds of FTSE 100 companies’ turnover was derived from overseas sales.

But the new study has raised this to 77%. According to the Capital Group, 30% of the FTSE 100’s revenues now come from emerging markets, 19% from the US, 17% from Europe excluding the UK, 5% from Japan, 4% from the rest of developed Asia, and 2% from Canada.

The pattern holds true for other developed market indices, the Capital Group found. 79% of CAC 40 revenues are earned outside France, for example, and 77% of the DAX’s turnover beyond Germany's borders.

In the MSCI All Country World index of 2,500 companies, emerging markets represent only 11% of the basket’s market capitalisation but 34% of its economic exposure. In contrast, the US accounts for 49% of the index by domicile but only 28% of sales.

For Rob Lovelace, portfolio manager of the Capital Group’s American funds, this challenges asset allocation models that rely simply on the country in which securities are listed.

‘This is going to push the industry toward more objective-based investing,’ Lovelace commented. ‘I think that is going to begin to swing the pendulum back toward objective-based investing after a long move toward geography-based investing.’

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