You are a young portfolio manager who has just been assigned a new portfolio. The current strategic asset allocation of the portfolio is 80% equity and 20% fixed income securities. The entire portfolio is invested in U.S securities only. The investor is interested in diversifying the portfolio internationally without changing the equity/ fixed income structure and the weights of the portfolio. The investor has the following question-
What are the benefits from incorporating foreign equity and foreign debt in a portfolio?
What are the additional risks that need to be considered?
What are your recommendations on how to choose foreign equity and foreign fixed income securities?