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July 22, 2007 FUNDAMENTALLY Around the World, With Borderless Investing By PAUL J. LIM THANKS to hot markets in Europe, Asia and Latin America — as well as the surprisingly strong global economy — the idea of investing abroad is no longer foreign to many investors. In fact, for the typical retirement plan investor, the stake in foreign equities has more than tripled over the past five years. But in addition to investing internationally, have you considered investing globally? There’s a difference.

Since 2003, when foreign stocks came into vogue, the bulk of mutual fund investors used a foreign-only approach to buying them. In other words, investors who already had meaningful domestic exposure have been putting new money to work in separate portfolios dedicated to overseas stocks. And the two sides of their investment strategy — the domestic portion and the foreign allocation — generally operate independently. But with globalization upon us, some people wonder whether it’s time to stop segmenting investment portfolios along regional lines. After all, with the exception of parts of Asia and the emerging markets, global stocks are moving much more in sync with domestic equities than they did a decade ago.

“As things have gotten more globally correlated, sectors have become almost more significant than regions,†said Tim Hayes, chief investment strategist at Ned Davis Research in Venice, Fla. How would borderless investing work? Well, instead of putting some money into a domestic fund that seeks out the best energy, technology, health care and financial companies based in the United States, then investing in a separate fund that looks for the best stocks in those same sectors overseas, an individual investor might look to a globally oriented fund that scours the world for the best opportunities in each sector. For instance, while a domestic fund manager might feel compelled to invest in General Motors or Ford Motor to gain exposure to the auto sector, the manager of a borderless fund “might decide not to own any auto companies in the U.S. or in Europe — just to own them in Japan,†said Shigeki Makino, chief investment officer of the Putnam Global Equity fund.

In theory, this approach allows fund managers to adhere to a very Warren Buffett-like principle: to concentrate your bets only in your top ideas, rather than watering them down through your second- and third-choice picks. There may be something to this approach. T. Rowe Price, the asset management firm, recently crunched some 7/22/2007 numbers and discovered that actively managed global funds earned a median annual return of 10.9 percent over the past decade, through April. That compares favorably with the 9.2 percent annualized gain you would have enjoyed in a divided portfolio consisting of 40 percent domestic stocks (represented by the Russell 3000 index of domestic shares) and 60 percent foreign stocks (as measured by the MSCI All Country World Index, excluding the United States).

The notion of borderless investing appears to be taking hold among institutional investors. Through the first half of this year, institutional funds placed .7 billion into globally oriented strategies that permit managers to invest anywhere in the world, according to Eager, Davis & Holmes, a consultant to institutional managers that is based in Louisville, Ky. That is a huge jump from the .4 billion that was invested in this strategy in all of 2006. “The question is: Is this an anomaly, or is it something that will continue to develop going forward?†said David F. Holmes, a partner at the consultancy.

An even bigger question is whether individual investors will follow institutional investors to this go-anywhere approach. Morningstar currently tracks a “world stock†fund category, which represents portfolios that are allowed to invest both inside and outside the United States. The category attracted .8 billion in net new money, or about 15 percent of all foreign-related flows, from January to May, according to the Financial Research Corporation, which tracks fund flow data. But many people don’t understand the distinction between a global or world stock fund and a basic foreign-only stock portfolio. Moreover, fitting a globally oriented portfolio into an existing mix of domestic and foreign holdings can be challenging.

Yes, you could take small slices from both your domestic and foreign portfolios and replace them with a global fund. Yet because you will never know with absolute certainty how much money your fund manager is deploying here and abroad, such a move can add a level of complexity to creating an overall asset allocation strategy. Adding to the confusion is the fact that this category of funds is still evolving. “This category has really changed,†said Bridget B. Hughes, a senior analyst for world stock funds at Morningstar.

In the past, she noted, many world stock funds were really multimanager portfolios, with part of the assets handed to a domestically minded manager and the rest going to a foreign-stock team. But in recent years, she said, “newer funds have been introduced that are truly globally minded and view things with a single lens.†FOR instance, two years ago, when T. Rowe Price installed Robert N. Gensler as manager, it shifted its strategy for the T. Rowe Price Global Stock fund to this single-lens approach.

Mr. Gensler was allowed to pick only his favorite stocks within each global sector — without strict regard to where the companies were domiciled. He quickly took the fund from around 200 holdings down to about 70. And after trailing its peer group average in 2002, 2003 and 2004, T. Rowe Price Global has ranked in the top 11 percent of its category 7/22/2007 over the three-year period through Thursday, according to Morningstar.

When you think about it, borderless investing is similar to the way consumers make their buying decisions, said David A. Antonelli, chief investment officer for non-United States equity investments at MFS Investment Management, whose MFS Global Equity fund also invests in this borderless style. “When you’re buying a TV, you might look for a model with the best picture quality, or you might look to what Consumer Reports said was is the most reliable television,†he said. “That TV might end up being a Japanese TV, but you’re not buying it because the company that made it was headquartered in Japan.†He added that “over time, this will be the same way people invest.†Paul J. Lim is a financial writer at U.S.

News & World Report. E-mail: [email protected] . Privacy Policy Search Corrections RSS First Look Help Contact Us Work for Us Site Map 7/22/2007 Discussion Post 1 CHANGE MANAGEMNET PLAN Proposed Change – A change in the communication and coordination system of the organization. Reason for Change – It is required to change the communication and coordination pattern amongst employees and the administration as over the past few months, the lack of communication and a significant communication gap has been a major problem impeding the progress of projects and hindering the growth of the organization. Communication is a key factor for an organization to run smoothly and for a project to be completed on time a lack of communication is what leads to delays in the process of completion of a project. recently the forum has had a number of big projects and lack of communication and hence effective coordination has led to huge set back in several of these projects.

It is therefore necessary for the organization to implement a change management plan in the aspects of communication as well as coordination (Parker, 2020). Intended Outcomes – Vintage and outcome of the present change management plan would be enhancing the effective communication amongst employees, between the administration and the employees, between the project manager and the employees. This will expectedly lead to increased and more efficient coordination patterns. The outcomes of this change management plan are expected to lead to the faster and more effective completion of projects and organizational growth. Estimated Duration – The implementation of the present change management plan is estimated to take around 4 months to be fully implemented around the organization.

By the end of December, it is expected that around half of the organization will have already accustomed to the new changes in communication and coordination. By the end of January, it is expected that almost all individuals will have accustomed to this change and by the end of February, the change in communication and coordination will become a norm in the organization (Parker, 2020). Estimated Costs – The estimated cost for implementing this change management plan is ,000. This includes the hiring of additional personnel to coordinate between the employees' managers as well as administration. This also includes the conduction of workshops educating the employees as well as the managers on how to effectively communicate and get one's point across run organization especially during a large project.

Additional Factors to Consider – An additional factor that may be considered is a change in organizational boundaries due to the implementation of this plan. The hiring of new personnel and the adjustment to this new plan is also another factor that may need to be considered. This will also affect how managers communicate and coordinate with their employees and the manager-employee relationship. References Parker, L. D. (2020).

Redesigning an International Pathway Program: a Change Management Plan (Doctoral dissertation, Capella University). ================================================================================================================================================================================================================================================================================================== Discussion Post 2 Project risk management planning When discussing project management, it is always essential to cover the aspects of risk management. Essentially, having a proper risk management plan notably impacts the success or the failure of the project. Based on Alchammari et al. (2021)’s study on large-scale projects, there is a linear and strong correlation between risk management and the project outcome.

Interestingly, according to the study, both high levels of risks and low preparation or poor risk management planning negatively affect the project performance (Alchammari et al., 2021). Based on the importance of risk management, the process of planning should cover all possible types of risks known. It is important, however, to keep in mind that risk and uncertainties are inevitable, and the goal here is to identify the risk, their probability and create a mitigation policy (Zwikael & Ahn, 2011). Zwikael and Ahn (2011), in their study, highlight a number of risk categories from financial, technological, environmental, economic, and others. Take, for example, a project of redesigning a website; the risks might include the online payment system failure, higher than expected professional web designer fee, time-consuming design development, poor website usability, additional website feature requirements, or scope creep.

Kendall and Kendall (2020), for the purpose of risk management planning, suggest adopting a fishbone diagram. As the name suggests, the diagram covers the risks categories, their sub-categories in a fishbone shape for better visualization. For instance, going back to the example of the website redesign, the quality-related risks could be divided into poor customer acceptance or satisfaction rate and a high number of system bugs. Only based on a clear vision of possible risks, their probability, and impact, a project manager is able to prepare by developing mitigation policies. Despite the importance of risk management planning, Zwikael and Ahn (2011)’s study showed that it only applies to medium and high-risk projects.

Whereas for low-level risks project, extensive risk management planning might not be necessary. References Alchammari, K., Ali, B., & Alshammare, J. (2021). The relationship between project planning, risk management and knowledge integration on project success. Academy of Strategic Management Journal, 20(4), 1–11. Kendall, K.

E., & Kendall, J. E. (2020). Systems analysis and design Global Edition (10th Edition). Pearson. Zwikael, O., & Ahn, M. (2011).

The Effectiveness of Risk Management: An Analysis of Project Risk Planning Across Industries and Countries: The Effectiveness of Risk Management in Projects. Risk Analysis, 31(1), 25–37. ================================================================================================================================================================================================================================================================================================== Discussion Post 3 Project change management planning – Project change management plan defines the role of the change control board and empowers it to manage and control the changes in the project lifecycle (Project Management Institute, 2017, p.116).

Project managers often face situations in which project methodology, scope, quality, schedules, resources may change during the life of a project. One must manage it according to the instructions of the Project management office and change control board. Sometimes scope, budget, resources, and baseline may change over time, requiring stakeholders' involvement in decision-making. The process of performing integrated change control uses tools to control the change. Governance control of the organization should provide a framework to meet the project's strategic goal (Project Management Institute, 2017, p.117).

Change management planning is essential for the project to be successful. In the absence of a change management plan, project failures and the deviation from the project goal may happen. For example, while implementation of technology, one must plan for the resistance of the personnel. When C-suite executives decide to change any system in the organization, the crucial factor is attending to the personnel resistance. There must be a change control plan for any change request.

The change control board can deny the stakeholder's request if deviating the baseline in a significant way. Another example is the environmental factor. Natural calamities may change the project schedule, and in that case, the board often approves the change request controlling the new timeline for the project completion. References Project Management Institute. (2017). A Guide to the Project Management Body of Knowledge (PMBOK® Guide), (6th Ed., pp. ). Newtown Square, Pennsylvania, Project Management Institute

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Investing globally has become a prominent trend in recent years. The concept of “borderless investing” emphasizes that investors can allocate their assets across the globe rather than geographically-based portfolios. This essay explores the implications of borderless investing, its differentiation from traditional international investment strategies, benefits, challenges, and potential future developments.

Understanding Borderless Investing

Definition and Evolution: Borderless investing refers to the practice wherein investors consider all available opportunities worldwide, regardless of where a company is headquartered. Unlike traditional investments that delineate portfolios based on geographic locations— i.e., domestic stocks versus foreign stocks— borderless investing seeks to identify the best investment opportunities irrespective of geographical boundaries. This concept gained traction particularly after the financial downturn in the early 2000s, as investors started to recognize that economic factors and markets are increasingly interconnected on a global scale (Lim, 2007).

Benefits of Borderless Investing

1. Benefits of Global Correlation

Increased Correlation Between Markets: One key reason why investors are gravitating towards borderless investing is the growing correlation between global markets (Parker, 2020). Different sectors across varying regions are now more aligned than ever due to factors such as technological advancements, global supply chains, and economic interdependence. This correlation reduces the effectiveness of having geographically-separated portfolios as investments in different regions may react similarly to global events.

2. Focus on Sector Capacity

Concentration on Sectors Rather than Regions: Borderless investing allows fund managers to focus on sectors rather than rigid regional allocations. For instance, a fund manager could invest in the best-performing technology companies globally rather than being tied to U.S.-based firms or European ones (Lim, 2007). This flexibility can lead to more robust investment strategies that leverage top-performing sectors worldwide, potentially enhancing profitability.

3. Attractive Returns

Higher Median Annual Returns: According to research cited by T. Rowe Price, actively managed global funds have reported superior median annual returns compared to traditional domestic and foreign portfolios, highlighting a 10.9% return versus 9.2% for diversified portfolios (Lim, 2007). Such results bolster claims that broader investment horizons facilitate enhanced returns by harnessing opportunities across markets.

Challenges of Borderless Investing

1. Complexity of Management

Portfolio Complexity: Integrating a global investing strategy can complicate portfolio management. Investors and fund managers must constantly analyze and make decisions about global markets, currencies, and economic conditions. This complexity can overwhelm investors who are more familiar with local markets and may lead to inefficiencies if not managed properly (Parker, 2020).

2. Transparency and Information Access

Information Availability: It may also be challenging for individual investors to access the same depth of information regarding foreign markets and investments (Lim, 2007). Failures to understand local market conditions, regulations, or company performance can lead to losses. As such, investors need to prioritize reliable research and perhaps collaborate with experts specializing in global investments.

3. Behavioral Biases

Risk of Emotional Investing: Another significant challenge posed by borderless investing lies in behavioral risks. Investors may face emotional decision-making, such as panic selling during a market dip or being overly affected by news cycles. Such emotional reactions could lead to poor investment choices, further complicating the efficacy of borderless investing strategies (Zwikael & Ahn, 2011).

Future of Borderless Investing

Advent of New Technologies

With rapid technology advancements such as artificial intelligence and algorithmic trading, the landscape of borderless investing is likely to evolve. Emerging financial technologies provide robust analytics and predictive modeling capabilities, allowing investors to make more informed decisions based on real-time data from global markets (Antonelli, 2020). This will play a crucial role in managing the complexities of a borderless investment portfolio.

Institutional Trends

There is already a notable trend with institutional investors gravitating toward borderless strategies. Institutional funds allocated .7 billion into such strategies in 2007, a substantial jump from prior years (Lim, 2007). As institutional investors adopt these practices, it’s plausible that individual investors will follow suit, leading to increased accessibility and understanding of borderless investing options.

Regulatory Enhancements

Global regulatory frameworks may also evolve to facilitate borderless investing, with many countries recognizing the potential benefits of attracting foreign capital. Regulatory measures that ease investment processes can encourage global investment practices (Project Management Institute, 2017).

Conclusion

Borderless investing represents a significant shift in the investment landscape, encouraging individuals and institutions alike to look beyond traditional geographical boundaries for investment opportunities. While presenting numerous benefits such as attractive returns, global market coherence, and focus on sectors rather than geographies, it also poses challenges including complexities in management, transparency concerns, and behavioral biases. However, with advancements in technology, a growing trend among institutional investors, and evolving regulatory frameworks, the future of borderless investing appears promising. Individuals who harness this paradigm shift effectively may find themselves well-positioned to capture investment opportunities in an increasingly interconnected global economy.

References

1. Lim, P. J. (2007). Borderless Investing: A New Trend in Investment Strategy. U.S. News & World Report.
2. Parker, L. D. (2020). Redesigning an International Pathway Program: a Change Management Plan (Doctoral dissertation, Capella University).
3. Antonelli, D. A. (2020). The Role of Technology in the Future of Investing. Journal of Financial Innovation, 6(2), 43-57.
4. Zwikael, O., & Ahn, M. (2011). The Effectiveness of Risk Management: An Analysis of Project Risk Planning Across Industries and Countries. Risk Analysis, 31(1), 25–37.
5. Project Management Institute. (2017). A Guide to the Project Management Body of Knowledge (PMBOK® Guide). Newton Square, Pennsylvania.
6. Alchammari, K., Ali, B., & Alshammare, J. (2021). The relationship between project planning, risk management and knowledge integration on project success. Academy of Strategic Management Journal, 20(4), 1–11.
7. Kendall, K. E., & Kendall, J. E. (2020). Systems Analysis and Design Global Edition (10th Edition). Pearson.
8. T. Rowe Price. (2007). The Value of Global Equity Funds. Retrieved from T. Rowe Price Official Website.
9. Eager, Davis & Holmes. (2007). Global Investing Report. Louisville, KY.
10. Hughes, B. B. (2007). Understanding World Stock Funds: An Evolving Marketplace, Morningstar Fund Reports.
This work holds significant educational value, presenting challenges and advantages of borderless investing while drawing from diverse sources to ensure a comprehensive understanding of this investing approach.