US investors urged to invest in emerging markets: Goldman Sachs

With most US investors having no more than 5-10 per cent exposure to overseas markets such as China, India and other emerging markets that promise superior growth in their portfolios, they are missing out on the most promising investment opportunities, according to Brent Ciliano, a portfolio strategist at Goldman Sachs Asset Management. Ciliano confirmed that 70 per cent of small-cap stocks are outside of US, two-thirds of Real Estate Investment Trusts (REITs) and about 55 per cent of global equities are also overseas.

Citing Ibbotson Associates research which shows that US share of global financial markets has been on a downslide from 70 per cent in 1970s to 45 per cent presently and also forecasts holdings sliding further to 30 per cent by 2030, Ciliano said that holdings by other countries were increasing too—faster than in the past—and thus, US could end up losing share in overseas markets to 30 per cent in just five years.

Promoting Goldman’s investing strategy of surrounding a core portfolio with satellite assets such as emerging market stocks and debt, US and global REITs, commodities, international small cap stocks, Ciliano advised that these holdings should comprise about 15-20 per cent of the overall portfolio of the US investor.

Owing to the global economic contagion faced by developed countries, US in particular, and expansion of Asian markets, the rest of the world will represent a bigger share of the global marketplace in coming years.