Evaluating Global Integration Strategies for Asset Allocation

As a senior portfolio manager at an international investment firm, you are reviewing a report on the implications of global integration for portfolio asset allocation. The report highlights three different strategies for investors looking to optimize returns by taking advantage of global market efficiencies. The first strategy emphasizes maintaining a strict geographical allocation based on established macroeconomic indicators. The second strategy advocates for a more dynamic approach that allows for reallocating assets in response to shifting global market trends, without strictly adhering to geographical boundaries. The third strategy suggests incorporating derivatives to hedge against geopolitical risks while allowing for investments in emerging markets.

Your task is to determine which strategy best aligns with the principles of global integration while maximizing potential risk-adjusted returns.