Janus Henderson’s McManus says investors eye overseas stocks

Investors are becoming more willing to increase their exposure to international equities, as concerns over the dominance of the “Magnificent Seven” technology giants encourage diversification away from U.S. stocks, Janus Henderson Investors’ Julian McManus told CNBC.

“There’s definitely a move to explore more outside the U.S.,” the portfolio manager on Janus Henderson Investors’ Global Alpha Equity Team said in an exclusive interview. The firm reported about $480 billion in assets under management as of March 31.

The shift marks a stark contrast with two years ago, when U.S. financial advisers were more reluctant to consider overseas markets after a decade in which American stocks consistently outperformed international peers.

The MSCI ACWI ex-US index has risen over 8% year-to-date, compared to the S&P 500’s gains of 6.8%, data from LSEG showed.

McManus said investors had become heavily concentrated in a handful of large-cap U.S. technology stocks, leaving portfolios vulnerable if leadership in those names faltered.

“The Mag Seven is nearly half of your index, and you’re all in,” McManus said. “If that goes into reverse, you’re going to have a problem.”

While he stopped short of describing the shift as a wholesale exodus from U.S. assets, McManus said the recent outperformance of international markets had prompted investors to reassess global allocations.

“I wouldn’t say it’s like a stampede. It’s by no means a panic,” he said. “But at least people are more open to having that conversation.”

McManus added that politics had played only a limited role in investors’ asset allocation decisions despite heightened geopolitical uncertainty.

“I think the political debate sort of comes and goes, but I think most advisers, most investors are fairly pragmatic and they’ll go where they see the returns, and they tend to overlook the politics,” he said.