The global economy is expected to more than double in size by 20501, and economic power is set to shift away from the G7 economies towards emerging markets, underpinned by population growth that will fuel domestic demand, create new business opportunities, and attract fresh investments2.
A Need for Global Diversification
Many investors, however, are not well positioned to take advantage of these opportunities, as their portfolios tend to be disproportionately exposed to their home market. OppenheimerFunds’ Generation Project3 research found that while 88% of U.K. high-net-worth investors hold U.K. equities in their portfolios, only 62% hold international equities. This “home bias” means that many investors’ portfolios are not only overexposed to the idiosyncrasies of their home market, but also may be missing out on the opportunities for future growth and outperformance offered by the rest of the world.
The paper Globalise Your Portfolio examines how a global approach may allow investors to:
- Capture the multiple opportunities created by a changing world,
- Pursue the most compelling investment opportunities anywhere, irrespective of location,
- Potentially maximize their pursuit of strong risk-adjusted returns.
- Global or international equity funds
- Emerging market equity funds
- International bond funds
Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes, regulatory and geopolitical risks. Investments in securities of growth companies may be volatile. Emerging and developing market investments may be especially volatile. Eurozone investments may be subject to volatility and liquidity issues. Investing significantly in a particular region, industry, sector or issuer may increase volatility and risk.