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The answer, surprisingly, is not necessarily – the FTSE All-Share index has a global bias.

Nearly 70% of the revenues of FTSE All-Share companies are earnt overseas.  So if you thought by investing in your UK All-Share tracker funds that the returns would be linked to the UK economy, you may be surprised to learn about the high level of overseas earnings made by UK companies. Such earnings by UK companies dwarf those of our neighbours. Europe only derives 40% of its earnings overseas and Japan and the US 32%, respectively.

This may provide some reassurance that when the present mood and consensus opinion is that the UK economy is stagnant and may even fall into recession, that the earnings of UK companies are not reliant solely on the UK economy.

Another belief is that we don’t manufacture anything any longer! Services did account for 78% of the U.K.’s GDP last year but only 7% of this related to financial intermediation (which includes banking), with 24% coming from the public sector. In recent years, manufacturing has grown steadily from 12% to 14% of GDP, and has been a bigger direct contributor than the financial services sector.

History tells us that economic growth is a poor predictor of stock market returns. Over the past 16 years the Chinese economy has grown 10% per annum, whereas the stock market has delivered a disappointing 5% annualised return. Brazil, conversely, enjoyed a more pedestrian economic growth of about 4% but its equity market was one of the best performing in the world with annualised returns of over 20%.

So why am I telling you all this? Is it that I just want to impress you by my knowledge of the GDP breakdown and the make-up of the FTSE All-Share? No, it’s because I want to share the knowledge that UK listed companies are actively pursuing global growth strategies throughout the world and we here in the UK have the opportunity to enjoy the rewards of these strategies easily and cheaply by lending money to the constituents of the FTSE All-Share.

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