Investing In The New World Order
To make smart choices, global investors need to grasp the complex and shifting connections across economies and sectors

In search of international diversification, a U.S. investor buys French stocks, a Japanese index fund and some German bonds. Her money may now be spread across the map—but is she truly reaping the rewards of a global economy? Not if the best opportunities lie hidden in the Indian housing market, the untapped enthusiasm of Vietnamese entrepreneurs or the rapid growth in Brazilian infrastructure. The belief that merely investing in international equities will provide adequate diversification and growth may no longer be true—if it ever was. In today’s increasingly accessible world, with its ever more complex web of connections, sophisticated investors can no longer achieve international diversification simply by investing in BRIC (Brazil, Russia, India, China) funds or baskets of Asian or Latin American stocks. Truly international investors seek out the best equity, bond or alternative investment opportunities on a case-by-case basis, whether they’re found in Baltimore, Bangkok or Brussels.
To make smart choices, global investors need to grasp the complex and shifting connections across economies and sectors



According to a 2007 CalPERS study, the U.S. accounts for about 43% of the global equity market, meaning about 57% of global equity opportunities lie overseas. Yet, international stocks presently make up less than 13% of the average U.S. investor’s equity portfolio. Depending on their risk, many investors could consider holding as much as 30% of their total portfolio holdings, or 40% of their equity allocation, in non-U.S. investments.

A truly global portfolio doesn’t just expand the set of available opportunities. The sheer number of investment choices allows an investor to create a more efficient portfolio that meets highly specific needs.

That added efficiency could mean the ability to achieve the same rewards with lower risk than in an overwhelmingly domestic portfolio. If the goal is growth, that efficiency will be used to gain higher returns for a potential degree of risk.
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