A New Lens for Measuring Global Diversification (Part 2)

You might be better-diversified than you think.

Ben Johnson 24.10.2019
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In part 1 of this article, we looked at how regionally-diversified some of the U.S. ETFs are, in part 2, we will look at diversification in other lenses.

Looking at the data through the lens of sectors provides more insight into these differences in fundamental geographic diversification. Exhibit 3 shows the breakdown between "Home" (the U.S. in this case) and "Away" (ex U.S.) revenue for the Select Sector SPDR ETFs. It should come as little surprise that the utilities, real estate, and financials sectors generate most of their sales in their home markets. These companies' assets and customers are typically landlocked. It's worth noting that these sectors also tend to be those most sensitive to fluctuations in local interest rates.

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Ben Johnson  Ben Johnson, CFA is the Director of Passive Fund Research with Morningstar.

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