Investing in Global Equities: An Alternative Approach to Structuring Equity Portfolios

Abstract

Hiring the right manager is crucial in capturing the alpha potential of a fully global approach to equity investing. Since 1999, global equity managers, as a whole, have outperformed a combination of U.S. and non-U.S. managers, although evidence of out performance is weaker over the longer term. Only 21% of these global managers have actually added value through their allocations to U.S. and non-U.S. stocks. Managers taking larger active country, sector, and stock bets outperform those who take smaller bets. The greater excess-return potential of global equity managers is due to the broader investment opportunities and additional sources of alpha associated with stock and sector selection across a universe that encompasses both U.S. and non-U.S. stocks.

TOPICS: Global, equity portfolio management, portfolio construction