Foreign Diversification Questioned

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Published in Pensions & Investments, this practitioner article challenges the conventional assumption that international equity exposure reliably reduces portfolio risk. Drawing on data from major global equity markets, Scanlan presents conditions under which cross-market correlations converge — particularly during periods of stress — and argues that diversification benefits are frequently overstated in standard mean-variance analysis.

The article was written during Scanlan’s early years at Barclays Global Investors and reflects the firm’s research-driven approach to international asset allocation. It anticipates concerns that would become mainstream in the institutional investment community following subsequent global market crises.