Going Global

In today’s economy, it’s more important than ever for investors to take a global approach to constructing their portfolios.

The United States market share of the global equity market has been on the decline and will likely continue to turn down in the coming years. 10 years ago, the U.S. made up roughly half of the global market share; today, it makes up about 40 percent.

Growth in other regions of the world, particularly emerging markets, will continue as the middle class expands. Demand in emerging markets is growing and investors should find ways to participate.

From our perspective, there are two strategies to capture this growth:

1. We invest in large multi-national companies based in the U.S., but a significant portion of their revenues come from overseas. Almost half of the S&P 500 companies’ revenues are now generated outside the U.S.
2. We diversify our capital appreciation model to have equity allocation in domestic, Non-U.S., and emerging market strategies. This approach provides investors diversification of companies based in the United States and Non-U.S. markets.

For example, we invest a large portion of the U.S. equity allocation with domestic large-cap managers. These managers invest mainly in companies based in the United States, but can also draw revenues from overseas.

Additionally, in our client asset allocation models, we think it is important to incorporate a significant portion to managers focusing on Non-U.S markets. We carve out roughly 30 percent of our equity allocation to international funds, with a small portion of that potentially going to emerging market managers.

For more information about allocating globally and taking advantage of international markets, visit back to Ramparts for future insight.