Asset Allocation and Geography of Revenues

Posted: February 1, 2016 in markets, Uncategorized

Most people buy an index or a regional managed fund  because they want an exposure to a geographic market.

With the global market one should more looking into the revenue streams of the companies.

An example – you buy an ETF US SP500.

You think you are buying “the US” market….instead you are actually buying

67% US, 5% mainland China, 3% Japan and 3% Canada, 2% UK, Germany, France (each), 1% Brasil and 15% rest of the world.

A broad Europe ETF is similar 55% Europe, 24% Americas, 16% Asia, 5% Africa and Middle East.

So you should pay attention to what you are really buying. I think very few thought that buying a US ETF they were actually buying almost 15% of Emerging Markets!

Specially because looking in a 10 year span, on the SP500, Europe and Japan contributions are declining while China and Brazil are increasing.

Same happens at Sector level (even if some sectors like Healthcare tend to be more local and others like Tech more international).

Font: GeoRev, FactSet

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