Cambridge Associates examines whether global diversification still works when markets become more synchronized and dominated by US assets. The paper challenges the assumption that adding international equities always reduces risk, noting correlations have risen meaningfully over time while diversification benefits have become more conditional and less reliable.
Benefits Of Global Diversification
Cambridge Associates
Research
10 Pages
Key Takeaways
Rising Correlation Risk: Cross-market equity correlations increased from roughly 0.4 in the 1990s to over 0.8 in recent decades, reducing traditional diversification benefits during downturns.
Public Markets Concentration: US equities grew to more than 55% of global market cap, meaning many global portfolios are implicitly dominated by one economy.
Private Assets Diversification: Private investments showed materially lower correlations, often below 0.5 versus public equities, offering more consistent diversification across cycles.
Join our newsletter to have all of this content + Exclusive Newsletter Bonus Content delivered to your inbox every week
Related Content
