Practical Applications of International Equity Investing: International Equity Investing: Is Flexibility the New Diversification?

Abstract

Practical Applications Summary In International Equity Investing: Is Flexibility the New Diversification?, from the September 2019 issue of The Journal of Portfolio Management, Sunder Ramkumar, Michelle Black, and Vincent Fu (all of Capital Group) investigate the effects of geographical restrictions on US mutual fund performance. They find that, in the face of increased correlation of equities around the world, investment strategies with fewer geographical restrictions perform better than traditional international portfolio allocations designed to offset risk in US domestic investments. The authors attribute this enhanced performance to a wider opportunity and greater flexibility among managers. “We argue that the case for international investing increasingly rests on the return potential from investing in a broad set of companies and that flexibility to invest across borders is key to capturing this value,” they write. TOPICS: Emerging markets, mutual funds/passive investing/indexing