Globalization and the increasing size and importance of emerging-market economies call for a change in the way money managers approach asset allocation for international stocks.
Consolidating developed and emerging-market sectors into one index-based global portfolio can be a more efficient way to capture the international market than separating exposure to these two market segments, according to Michael Branch, a research analyst for Aperio Group LLC, writing in Index Universe.
By switching to a consolidated portfolio investors benefit from lower turnover and reduced operating costs.
Branch’s research paper suggests that money managers and investors today have access to far more efficient investment vehicles that allow exposure to more targeted markets.
“Investors now have access to much more flexible ways to manage their asset allocation to emerging markets while avoiding the drag on performance from taxes and transaction costs that results when foreign stocks are divided into two distinct baskets,” he writes.
Branch analyses how international investing opportunities have evolved and also discusses the advantages of various types of global portfolios that combine developed, emerging, domestic and foreign into a single asset class.