Are your offshore investments diversified, or are you taking way more risk than you think?

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You think you're diversified, but you're likely not. If you own a global equity fund that tracks the MSCI World Index, or for that matter most funds marketed as ‘international diversification’, you might assume your money is spread across the world's major economies. After all, it feels like that diversification would be baked into the premise of a ‘global’ fund.

But the reality stands in stark contrast to that assumption. As of late January 2026, the MSCI World Index is approximately 75% US equities. Three-quarters of your ‘global’ portfolio is concentrated in a single country.

But it wasn’t always like this. In 2010, US equities made up just under 50% of the same index. The shift happened gradually, almost invisibly, as US markets outperformed the rest of the world for 15 years straight.

How geographic concentration crept in

Market-cap weighted indices have this mechanical reality where the winners get bigger. As US equities outperformed, their weighting in global indices grew. Investors who bought ‘diversified global exposure’ a decade ago now hold something quite different: a concentrated bet on the continuation of American exceptionalism.

To be clear, we’re not criticising US companies. American businesses have been remarkably innovative, and their capital allocation has generally been superior. The question isn't whether US companies are good. The question is: should they trade at a permanent premium to the rest of the world? And what happens if that premium narrows?

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What’s happening right now with US equities?

Two things stand out about US equities today.

The first is valuations. US equities are close to the most expensive they've been on record, measured by the cyclically-adjusted price-to-earnings ratio (CAPE). European equities, by contrast, sit much closer to their long-term average. History shows that when you invest in expensive markets, your forward returns over the next 5-10 years tend to be lower. When you invest in cheaper markets, forward returns tend to be higher.

The second things is the strength of the dollar. The US dollar is estimated to be 10-15% above its long-term fair value. Importantly, dollar strength and US equity outperformance are tightly correlated. When the dollar is strong, US assets tend to outperform. When the dollar weakens, assets around the rest of the world such as emerging markets, commodities and developed markets outside the US, tend to do better. In 2025, the dollar weakened by roughly 11% against a basket of developed market currencies. It was the first significant year of non-US outperformance we've seen in 15 years.

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Don’t forget that market cycles can be very, very long

Markets move in long cycles, mostly longer than most investor’s memories.

From 1970 to the late 1980s, non-US equities outperformed US equities by more than 8% per year for 18 years. Then the cycle turned, and US equities dominated through the 1990s tech boom.

From 2000 to 2008, US equities experienced what's sometimes called the ‘lost decade’, essentially zero real returns for a full ten years. During that period, emerging markets and commodities performed exceptionally well. In fact, South African equities were among the standout performers globally.

From 2008 to 2023, US equities were the only game in town, outperforming by close to 8% per year.

If you've been investing for 10-15 years, US outperformance is all you've known. It would be easy to assume this is permanent, but history suggests otherwise.

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What happens when cycles turn

The recent moves have been significant. In 2025:

• The S&P 500 returned about 17% in dollars, but only around 3% for rand-based investors once currency effects are included
• Emerging markets returned approximately 17% in rands
• Developed markets outside the US returned about 16% in rands
• The JSE was one of the standout performers globally

This is what a potential regime shift looks like in its early stages. Not a dramatic crash, but a quiet rotation as the rest of the world starts to catch up.

The question to ask yourself

If you hold significant offshore exposure, it's worth understanding what you actually own. Not what the fund is called, but where the money is invested.

You might want to ask what happens to your portfolio if the dollar falls another 10-15%? Or, what if US equities deliver another ‘lost decade’ while emerging markets outperform?

Diversification isn't about holding many funds with different names. It's about holding assets that behave differently in different environments. If 75% of your "global" allocation is in one country, at historically high valuations, in a currency that's historically expensive, then that's starting to look less like diversification and more like a concentrated bet.

And look, it might actually work out. Concentrated bets sometimes do. But it's worth knowing if you're making one.

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How we think about this at 10X Investments

At 10X Investments, this isn't a new problem for us. When 10X launched in 2008, two stocks - Anglo American and BHP Billiton - made up 35% of the JSE. We pioneered capped indices in South Africa specifically to avoid that concentration risk.

Today, we apply similar thinking globally. The 10X Your Future Fund has been underweight US equities for some time, not because we think US companies are bad, but because valuations are stretched and concentration has reached levels we're not comfortable with.

Our approach is to build portfolios that can deliver returns across a range of scenarios, rather than betting on one outcome. That means accepting that we'll lag when concentrated bets pay off, but also that we won't blow up and take your retirement savings with us when they don't. To sum it up, we'd rather be diversified and slightly wrong, than concentrated and very wrong.