Ashton Global Investment Research

1. Current valuation levels make the traditional case for global investing much stronger. International stocks provide
the benefits of diversification, and they also produce high returns on their own. The run-up in US stock prices
means that foreign stocks are currently under-owned, relatively inexpensive, and likely to outperform. We believe
that frontier markets provide unique opportunities to reproduce the past successes of the emerging markets.
ASHTON GLOBAL
A GROWING CASE FOR INTERNATIONAL INVESTING

2. 1
ASHTON GLOBAL
A GROWING CASE FOR
INTERNATIONAL INVESTING
Diversification
It is possible to produce higher returns with lower risk
through global diversification. International investing
improved performance when it mattered most. Between
2000 and 2010, US stocks had an average return of -1.82%
per year. During that same decade, the emerging markets
produced an average annual gain of 9.78%.
Competitive Returns
International stocks also produce returns that are
competitive with US stocks. Between 1970 and 2010, global
stock markets generated an average gain of 8.68% per year
compared to 8.48% for domestic stocks. US stocks are on
track to produce higher returns during this decade. Even
with recent setbacks, international stocks still outperformed
during three of the last five decades.
Increasing Home Bias
40% may be the optimal allocation to international stocks,
but domestic investors are reducing their already low foreign
holdings. According to Fidelity, investors under 35 lowered
their international allocations from 21% to 13% between
2009 and 2017. Those between 35 and 50 reduced theirs
from 18% to 15%. Increasing home bias is partly the result
of uninformed return chasing.
Current stock valuations could make this the
right time to increase international allocations.
Valuation
The run-up in US stock prices during the last decade led to
high valuation levels, which often imply future
underperformance. Stock market capitalization as a
CONTACT
ASHTON
GLOBAL
48 Wall Street
New York, NY 10005
+01 212 514 8953
info@ashtonglobal.com

3. 2
percentage of GDP is one of the most respected measurements of stock valuation. In
the United States, it rose from 138% in 2007 to 166% in 2017. On the other hand, world
stock market capitalization as a percentage of GDP fell slightly from 114% to 112%.
US stock valuation relative to the rest of the world is now even higher than it was in
1999.
A More Inclusive Future
New countries become part of international financial markets as the global economy
expands, and they tend to outperform. Between 1987 and 2012, the emerging markets
grew from less than 1% of the MSCI ACWI to more than 12%. China, India, and Russia
were not even a part of the MSCI Emerging Markets Index at its inception. We also
know that China is not going to be the next China. To reproduce those returns,
international investors must look to the frontier markets.
Despite a difficult decade, frontier markets still outperformed global
stocks over the long-term. Since May 2002, the frontier markets
produced an average annual return of 7.80% compared to 7.41%
for global markets.
The Growing Case
International stocks are competitive with US stocks in the long-run, and they are
currently attractively priced. Frontier markets like Kenya and Bhutan could be the
emerging market success stories of the future. However, frontier markets and
international private equity present unique challenges. We believe that institutional
clients are best served by a platform that gives them access to a variety of these
markets.
Ashton Global can help to identify fund managers with the right connections to private
capital in emerging and frontier markets. Firms in developing countries often grow
faster before the general public has the opportunity to become involved. Investing
outside of existing stock markets is one of the few remaining ways to generate genuine
alpha.
Please contact us at +1 212 514 8953 or email investor@ashtonglobal.com to learn
more.