Britons are looking across the Atlantic in the hope of making the most of their ISA investments.
The Chancellor, Jeremy Hunt, recently announced a push to encourage the nation to invest in British companies.
However, the evidence to date is that people chasing strong returns see global powerhouse companies whose shares are listed in the US as the best option.
Experts say the reason is simple: Britain’s stock markets have massively underperformed others around the world over the past 10 years in terms of returns to investors.
The top US picks include Nvidia, the microchips company which is thriving on the back of the rise of Artificial Intelligence, Microsoft and Tesla.
Investors are also developing an appetitive for making investments in cryptocurrencies, such as Bitcoin, despite the risks.
Investment analyst at AJ Bell, Dan Coatsworth, said: “Stocks that provide exposure to the US market and offer ways to play the artificial intelligence theme have been among the most popular choices for AJ Bell customers investing in an ISA between the start of January and the end of the tax year on April 5.
“With some of the best gains in recent years having come from US shares, it’s no wonder investors have fished for opportunities across the pond.
“At the top is chips giant Nvidia which has delivered stellar share price gains since early 2023.
“Having been last year’s best-performing stock in the US (+239 percent) and been responsible for much of the Nasdaq’s gains, ISA investors appear to have taken the view that the AI theme remains red-hot which presents further opportunities.”
He said another popular US option has been the little-known Samsara, which runs a platform that incorporates AI and brings together important operational data for businesses and governments.
Mr Coatsworth said: “Investors have also shown an appetite for higher risk, with stocks linked to bitcoin in demand during ISA season.
“Bitcoin miner CleanSpark is in the top 10 most popular stocks based on net flows while business intelligence firm MicroStrategy, which holds 214,246 bitcoin worth approximately $15 billion, is just outside of the top 10 based on net buys.”
The Chancellor announced a ‘British ISA’ in his Spring Budget which allows individuals to invest an extra £5,000 on top of the usual £20,000 annual ISA allowance, based on investing in British companies.
However, AJ Bell said the professional advisors who target the firms where ISA money should be invested are looking beyond the UK for the best returns.
Laith Khalaf, head of investment analysis at AJ Bell, said: “None of the 20 most popular funds and trusts chosen by ISA investors so far in 2024 appear to be eligible for the UK ISA, based on the rules currently proposed by the Treasury.
“The UK stock market is currently suffering from a chicken and egg dilemma, seeing as one of the reasons investors prefer overseas funds and trusts is the long-running underperformance of UK shares.
“So far this year the FTSE All Share has returned 3.3 percent, compared to 8.7 percent from the MSCI World Index.
“Zoom out a little, and over ten years the FTSE All Share had returned 74.1 percent, compared to 221.5 percent from the MSCI World Index.
“It doesn’t take a genius to work out why investors are eschewing UK funds in favour of global alternatives.”
