A Global Portfolio Should Generate Better Risk-Adjusted Returns, Newton Study Says
Go Global Investment Approach Suggested by BNY Mellon Firm
NEW YORK and LONDON, July 28, 2011 – A domestic bias continues to characterize the majority of U.S. investment plans, according to a recent study by Newton*, part of BNY Mellon Asset Management. A global approach across bond, equity and multi-asset portfolios could better serve investors’ risk and return objectives, the report suggests.
“Neither a bias against overseas investment, nor the demarcation of investments between domestic and international portfolios is appropriate in seeking fully to understand, manage or harness risk to the benefit of investors,” said Paul Markham, global equity portfolio manager at Newton. “Country risk is an important factor for investors to consider, but many of the risks to which investors are exposed are global in nature.”
According to Newton, investment opportunities, corporate revenues and earnings, accounting standards and capital markets are increasingly global in nature. Globalization is evident in patterns of returns from equity markets; stock-market sectors are performing more similarly, regardless of the markets in which they are located, the report notes. The report also states that the rising correlation between the performance of U.S. and non-U.S. markets reflects the global nature of opportunities.
“A global approach can provide the perspective that allows an investment manager to screen out the ‘noise’ that frequently characterizes financial markets, and to identify the enduring themes that really matter in identifying investment risks and opportunities,” Markham continued. “We anticipate that overseas markets will provide highly attractive opportunities to U.S.-based investors in the years ahead.”
The report further states its belief that currency risks are not aligned with an investor’s geographic exposure and that historically, the correlation between movements in the U.S. dollar and U.S. equity market performance has been weak. Newton also believes corporate governance considerations cannot be made along geographic lines alone; corporate governance standards vary as much between one sector or company and another, as between one region or country and another.
“While we equate the case for a global approach with global portfolio construction, many of the assertions we make are applicable to most investors, including those who, for whatever reason, choose to separate their domestic and overseas investments. Even when investing on a purely domestic basis, we believe a global mindset is indispensable,” Markham concluded.
The complete Newton report is available at www.newtoncapitalmanagement.com/whyglobal
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Notes to Editors:
Newton* is a London-based global asset management subsidiary of The Bank of New York Mellon Corporation and part of BNY Mellon Asset Management. With assets under management of more than $76 billion, including assets managed by Newton Investment Management Limited as dual officers of Newton Capital Management Limited and The Bank of New York Mellon, Newton's group of affiliated companies provides a broad range of award-winning investment products and services to individuals, pension funds, charities and corporations. News and other information about Newton is available at www.newton.co.uk.
BNY Mellon Asset Management is one of the world’s leading asset management organizations, encompassing BNY Mellon’s affiliated investment management firms and global distribution companies. Information about BNY Mellon Asset Management can be found at www.bnymellonam.com.
BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $26.3 trillion in assets under custody and administration and $1.3 trillion in assets under management, services $11.8 trillion in outstanding debt and processes global payments averaging $1.7 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation. Additional information is available at www.bnymellon.com and through Twitter @bnymellon.