Why include developed international securities in a portfolio?
With over 90% of the world’s equity market capitalization today coming from outside Canada, and over half of it even from outside the U.S., building a portfolio that combines foreign and domestic investments can result in a more diversified portfolio with unique opportunities for growth.
Portfolio applications for developed international
Many investors incorporate a strategic international equity allocation into their portfolios through tracking a diversified multi-regional index like the MSCI EAFE Index. The variety and flexibility of international single country and regional ETFs can translate into a wide range of portfolio strategy applications for investors looking to fine-tune their international exposures. For example, an investor who holds a broad international ETF like the iShares MSCI EAFE Index Fund (CAD Hedged) but has a short-term negative view on one or more countries in the index can layer on tactical short positions in those countries. In addition, country tilts can be implemented through adding long positions in single country ETFs to a diversified international position.
The availability of global sector-based ETFs means that investors can also use sector overlays to express views on specific sectors or to neutralize the implicit sector over- or underweights that can result from a portfolio’s country weightings.
* Source: MSCI, as of 12/09.