J.P. Morgan

8 G E O G R A P H I C A L A N D S T R A T E G Y D I V E R S I F I C A T I O N S T I L L M A T T E R - Increasing the weight in private equity may be a good option in emerging market economies, where exposure to equity growth is greater than in developed markets, and where a reasonably regulated public market index may not be available - An emphasis on high-tracking error managers throughout the developed and developing market allocations, to take full advantage of active risk taking in an environment of falling correlations and likely rising risk - Focus on value and dividend-oriented Asia (excluding Japan) and broad emerging market managers, to thematically emphasize a positive but more muted economic and earnings growth outlook - A slant toward long-biased equity hedge fund managers, rather than more absolute-return-oriented risk/return profiles, to increase the upside capture of strategies that are essentially an extension of the equity allocation of the portfolio Underneath all our assumptions and resulting allocations and implementation choices is a presumed risk framework that we have described as "balanced +." What might this mean for you? We invite you and your organization to a thoughtful and informed dialogue with our specialists in endowments and foundations to explore the risk profile, geographic allocation, liquidity and manager risk that would suit your particular investment objectives. KEY TAKEAWAYS All investors in equities—no matter where they live— should: 1. Look outside their home markets. No one region produces the top return each year, and having the proper global exposure is necessary. 2. Consider a broader range of execution vehicles. In addition to regional exposures, the use of different execution vehicles can help diversify portfolios in terms of investment strategy (e.g., style tilts, sector exposures, size biases, etc.). 3. Focus on the future. Investing for the long term requires building robust portfolios with increased diversification from a more global asset allocation strategy, and which emphasize risk-adjusted returns.

• Cover