Globalization of Equity Policy Portfolios, October 2009

Abstract

Globalization has brought about a major rethinking of the equity investment. Thought leaders in the industry are questioning the merit of the existing equity allocation practices and are increasingly looking towards an integrated global equity investment process. The partitioned domestic/non-domestic approach to equity investing may have been built on the grounds of segmented economies, high levels of foreign investment restrictions, and heavily domestically-focused companies but its validity is being challenged by a changing and more integrated global equity landscape. Traditional arguments supporting a home bias equity allocation are less defensible and certain leading institutional investors are realizing that the segmentation between domestic and international equities at a strategic level is a legacy that may come with important market timing risks and opportunity costs. A more integrated approach to equity investing may be the next stage in the evolution of investment processes and a natural consequence of globalization. A broad and investable global equity benchmark is an integral part of such a process.

Keywords: globalization equity policy portfolio investment integrated equity allocation domestic international market timing