UK ISA investors are shunning the US stock market, effectively ignoring almost half of the global equity market, according to analysis from Fidelity International. Despite a strong rally in US share prices, with the Dow Jones Industrial Average reaching an all-time high, UK savers are choosing to invest anywhere other than the world’s largest stock market, according to data from the UK’s Investment Management Association. Sales of North American funds were just 0.63 per cent of total gross ISA sales – just £5 million - in April 2007, the peak of the ISA season. But five years ago, the sector accounted for 4.3 per cent of gross ISA sales, with monthly contributions totalling £44 million. A long-standing trend for UK investors to be under-exposed to the US stock market relative to its global importance has accelerated, says Fidelity. At almost £15.8 billion, the North American funds sector accounts for 3.4 per cent of total equity investment through mutual funds. Through ISAs, this is just £534 million or 1.3 per cent of the total. Relative performance of North American funds has been poor though. Over the five years to the end of March 2007, the sector delivered the lowest returns of any sector, including bonds. An investment of £1,000 over this period has grown to £1,037, less than the same stake in an instant access account which delivered £1,068. The slide in the value of the dollar – a decrease of nearly 40 per cent over five years is to blame. This has greatly eroded the value of any stock market gains for sterling-based investors. In own-currency terms, US equities have performed almost on par with UK equities with the Dow Jones Industrial Average and S&P 500 Composite returning 47 per cent and 50 per cent in dollar terms compared with 57 per cent for the FTSE All Share in Sterling terms. So should UK investors get back into North American equities? Bob Haber, manager of the Fidelity American Special Situations Fund said: “The housing sector of the economy is still a concern. Prices have now begun to fall in many areas and may well continue to do so, but data from the housing market is not uniformly poor and we have recently seen a pick-up in sales of new houses. This may be more to do with price cuts to clear inventory, but it does show that there is still an appetite for new housing. In addition, the US economy is proving to be resilient in the face of potential problems for the consumer. “There are a number of companies which are continuing to benefit from global growth and I am finding opportunities in areas such as agricultural commodities. With the world population growing by around 50-70 million each year, the demand for food will continue. As this growing population starts to demand a high quality of food, so the demand for feed for cattle will also increase. Finally, this growing population, coupled with policy changes from governments is driving demand for alternative fuels. There are a large number of US companies well placed to benefit from these trends.”