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What is a Global Stock?


Referring to the PIAC asset allocation chart here, commentor JTN asks a good question.

“Looking at the asset mix graph, what does “global stocks” mean? My understanding is that Canada, US, EAFE and EM make up global. “

Many Institutional players are asking the same question.

First, MSCI World is the traditional global benchmark. That’s the 24 developed market country indices. But more and more the MSCI ACWI (All Country World index) benchmark whose components are 24 developed and 21 emerging markets is being used to represent ‘global’.

Second, the more traditional players can grant EM tactical access to EM through their EAFE mandate (10% or maybe 15% say).

Third, the Institutional Investment Management (Pension) industry will need some new tools (soon) as it is increasingly difficult to ‘domicile‘ some ‘global’ players. Take HSBC Bank, for example … how does one really know how much of their revenue/profit comes from where? HSBC is everywhere. How does one know his/her HSBC exposure to China, say?

RIM, Potash are Canadian stock examples … Canadian companies with relatively not much Canadian exposure. (Few Canadians buy Potash. And Blackberry sales are huge Overseas).

Many (about 1/2) of the U.S. companies on the S&P 500 get … about 1/2 of their revenue from non-U.S. sources. Does that mean your exposure is U.S.? Many Institutional players are starting to think not.

Some of the new tools that Institutions are building will have to have ‘look-thru’ to see true exposures.

Next time?
Fat, drunk and stupid.
Doug Cronk CFA is Manager, Investments for a Canadian Pension Plan
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2 Comments Post a comment
  1. JTN #

    Ah, just noticed this now. Thanks for the expanded answer. I think that as a DIY investor, the best I can do is to invest broadly and hope that my exposure is balanced. It’s too time consuming to figure out from where revenues are generated.

    Like

    June 8, 2011
    • Exactly.
      Most of us don’t have the resources, technology, time nor inclination to do research beyond asset class, region, currency (and maybe sector) … ETFs (and maybe index funds) do this for us.
      Cheers.

      Like

      June 9, 2011

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