Merrill Lynch Tells Investors To Diversify Globally

Carla Johnson, InvestorsOffshore.com

29 March 2001

International investment banking giant Merrill Lynch recently advised US investors to diversify their portfolios globally for better returns, and, no sooner the word than the deed, promptly launched a Multi Currency Asset Power facility helping ML clients to do just that.

Although the remarks were primarily directed at US investors in view of the turbulence of their domestic market, they could just as well apply to investors in any market at the moment, as rumbles in the American markets usually mean aftershocks everywhere else. The company's chairman, and president of its International Private Client Group, Winthrop H. Smith, Jr. warned that keeping all of your eggs in one domestic basket could prove hazardous: 'Even if those domestic shares are in a range of industries, there is still considerable country risk inherent in such a portfolio' he said.

Mr Smith stressed, however, that risk avoidance was not the only reason for savvy investors to diversify on a global level. Investing outside the local market allows investors access to industries and bond markets in which the domestic market does not have a competitive advantage, and depending on the country, can provide increased capital growth because of tax deferral possibilities or increased dividend yields. Mr Smith also noted that the wealthier an investor is, the more investments they tend to have in assets in global markets, although he admitted that currency fluctuations do add an element of volatility to international investing.

However, the new multi-currency tool developed by the company's International Private Client Group looks set to make this a little less of an issue, at least for selected Merrill clients, who, thanks to Multi-Currency Asset Power, are now able to hold assets in up to 60 currencies, the widest range of denominations available at present. According to the IPCG's director of products marketing, William Vulpis: 'It allows clients to easily switch between investment classes, to adjust asset allocation among stocks, bonds, mutual funds and cash, to better capture wealth generation opportunities wherever they are in the world.'

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