Investing Globally Can Provide Better Opportunities than Domestic Myopia, According to BNY Mellon Asset ManagementBy Bny Mellon, PRNE
Wednesday, November 17, 2010
Global View Can Aid Investors to Spread Risks and Achieve Better Returns
LONDON and NEW YORK, November 18, 2010 - Investing globally has the potential for providing better returns and
greater diversity of risk exposure than limiting capital allocations to home
markets, according to a new white paper by BNY Mellon Asset Management.
"Investing globally can help investors spread their risks and position
themselves to achieve better returns across a range of economic scenarios,"
says Curtis Arledge, vice chairman of BNY Mellon responsible for asset and
wealth management. "It seems that many investors in developed countries may
have not fully appreciated this approach, as studies referenced in the white
paper demonstrate an over reliance to home equities."
Among the trends driving a global investing approach are the rise of
emerging countries as growth engines for the world economy, the growing share
of global market capitalization outside traditional investment centers such
as the United States, and the trend toward truly global companies that derive
sizeable portions of their earnings from countries and markets far from their
As well as arguing the rationale for global investing, the white paper
addresses the range of perceived risks associated with investing beyond one's
domestic market; including the increased complexity of managing currency
translation risk and liquidity concerns, as well as fiscal and political
uncertainty in some countries.
An important factor underlying the trend for global investing is the
divergence in economic growth between emerging economies and the traditional
developed market countries. "While many emerging market economies were not as
severely affected by the financial crisis, the growth in developed economies
has been constrained by a deleveraging process that is shrinking the amount
of available credit," says Mitchell Harris, interim head of asset management
at BNY Mellon.
This deleveraging has caused sharp performance divergence between asset
classes and currencies around the world, as well as heightened volatility,
which can be exploited for returns, according to Newton*, one of the BNY
Mellon boutiques that contributed to the white paper.
"As individual country risks have changed, every company, sector, and
investment opportunity should be considered within a global context to
identify long-term winners," comments Helena Morrissey, chief executive
officer of Newton.
Investors who fail to take a global approach could be hurt by the
divergence between economic conditions in their home countries compared with
those of foreign markets.
"Active global equity managers with deep knowledge of local conditions
and future trends, who are able to accurately select companies and countries
with the greatest potential for outperforming returns, have been rewarded
after and even during protracted bear markets," adds Kirk Henry, portfolio
manager at The Boston Company Asset Management LLC.
Attractiveness of Emerging Markets
The rise of emerging markets has created opportunities for both equities
and fixed income investors, according to the white paper. The paper notes
that faster GDP growth and better opportunities for increasing productivity
are expected to help emerging markets equities out-perform those in developed
Many of the prior barriers that impeded the progress of emerging markets
countries have disappeared as the governments of these countries have taken
steps to bring inflation under control, liberalize their currency regimes,
develop local currency bond markets, amass reserves, and reduce their
dependence on external capital, according to the report.
For bonds, BNY Mellon's fixed income specialist Standish Mellon Asset
Management Company LLC says that more effective monetary policy in many
emerging countries has helped contain inflation and better fiscal policy has
kept indebtedness low, improving sovereign credit quality. David Leduc,
Standish's chief investment officer, points to the resilience of local
currency emerging market debt through the financial crisis. "They were the
local equivalent of U.S. Treasuries, a final safe haven during times of
stress. Emerging market local currency bonds have the potential to provide
investors with good diversification, attractive returns and a type of risk
that is not closely tied to the cyclical nature of credit," he adds.
Real estate and private equity investors can also benefit from taking a
global approach. In real estate, investors can take advantage of widely
different valuations across regional markets. The report notes that many of
the most dynamic sectors of the global economy and a number of the
fastest-growing emerging market companies are not yet available in the public
markets and can be accessed only through private equity.
As the proportion of foreign investment in investment portfolios
increases, investors will also need to guard against currency fluctuations
that can have a large negative impact on returns, according to Michael
Shilling, chief executive officer of Pareto Investment Management Limited,
the BNY Mellon currency hedging specialist.
The white paper concludes that with multiple asset classes and investment
strategies to choose from, it is clear that there is no one-size fits all
approach to global investing but the advantages of an investment philosophy
which seeks to leverage global trends and investment opportunities outside
domestic markets is difficult to refute.
Notes to Editors:
BNY Mellon Asset Management is the umbrella organization for BNY Mellon's
affiliated investment management firms and global distribution companies.
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, providing superior asset management and wealth management, asset
servicing, issuer services, clearing services and treasury services through a
worldwide client-focused team. It has $24.4 trillion in assets under custody
and administration and $1.14 trillion in assets under management, services
$12.0 trillion in outstanding debt and processes global payments averaging
$1.6 trillion per day. BNY Mellon is the corporate brand of The Bank of New
York Mellon Corporation (NYSE: BK). Additional information is available at
*'Newton' refers to the following group of affiliated companies: Newton
Investment Management Limited, Newton Capital Management Limited, Newton
International Investment Management Limited, Newton Capital Management LLC
and Newton Fund Managers (CI) Limited. Assets under management include assets
managed by all of these companies except Newton Capital Management LLC, which
provides marketing services in the U.S. for Newton Capital Management
Limited. Except for Newton Capital Management LLC and Newton Capital
Management Limited, none of the other Newton companies offer services in the
US and Canada. Newton Capital Management Limited is an investment management
firm authorized and regulated in the United Kingdom by the Financial Services
Authority in the conduct of investment business and is a wholly owned
subsidiary of The Bank of New York Mellon Corporation. Registered in England
no: 2675952. Newton Capital Management Limited is registered in the United
States as an investment adviser under the Investment Advisers Act of 1940.
All information source BNY Mellon Asset Management as at 30/09/10. This press
release is qualified for issuance in the UK and US and is for information
purposes only. It does not constitute an offer or solicitation of securities
or investment services or an endorsement thereof in any jurisdiction or in
any circumstance in which such offer or solicitation is unlawful or not
authorised. This press release is issued by BNY Mellon Asset Management (US)
and BNY Mellon Asset Management International Limited (ex-US) to members of
the financial press and media and the information contained herein should not
be construed as investment advice. Past performance is not a guide to future
performance. Registered office of BNY Mellon Asset Management International
Limited: BNY Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA.
Registered in England no. 1118580. Authorised and regulated by the Financial
Services Authority. A BNY Mellon Company(SM)
Mike Dunn, +1-212-922-7859, mike.g.dunn at bnymellon.com, or Karolina Adamkiewicz, +44-20-7163-2744, karolina.adamkiewicz at bnymellon.com
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