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Multinationals in International Allocation
Robert T 11-18-2005, 4:36 PM | Post #2050879 | 

Excellent question.

It's true that US companies with international operations provide some international exposure. A recent study, which I found useful (see link), estimates this to be between 8-13 percent of US equity holdings [the study guess is 12 percent].

International Diversification at Home and Abroad

However if we used this in the asset allocation decision to tilt from the global market we no longer seem to be comparing apples with apples. The document introduction indicates the global portfolio (at end 2001) to be about 52:48 US:non-US. But if the methodology described in the study is used, the global allocation will need to be adjusted - for illustrative purposes to 40:60 US:non-US (i.e. subtracting 12 from the US weighting as this is now regarded as non-US exposure). If this methodology is used for all markets the global geographic weigthings may change. These new weighting should then be used for the international allocation reference and not the 52:48 allocation mentioned above. Hence in the absence of this information we don't have a corresponding global allocation reference.

So while the 8-13 percent estimate is interesting we did not use this in our international asset allocation decision due to the factors describe above.

Kenster 1 - Thanks for the CBS link.


Originally posted in thread: 45188
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