There are virtues to providing global equity options in defined contribution plans such as using international, global and emerging markets strategies to pursue better absolute and risk-adjusted returns.
Global funds in particular can make sense for DC participants for several reasons. First, a broad global mandate offers the potential for better returns than separate allocations to domestic and international portfolios. That’s because a global portfolio holds what a portfolio manager considers to be the best companies in the world, rather than the best companies headquartered in a particular region. Ideally, the manager would also have the flexibility to invest in emerging markets, providing an additional avenue for exposure to some of the world’s fastest growing economies. (Of course, there are no guarantees that returns will be better.)
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