Emily has just received an inheritance and is contemplating how to allocate it across various global asset classes. As a CFA charterholder, she understands that global integration can significantly impact portfolio management decisions. Recently, she attended a seminar on the effects of geopolitical events on international markets, and she is aware of the current trends in emerging markets compared to developed markets.
Given this context, Emily considers the possibility of increasing her allocation to emerging markets and reducing her allocation to domestic equities. To make an informed decision, she consults with her financial advisor about the correlations between different asset classes worldwide, currency risks, and the effects of global economic policies.
Which of the following strategies is likely to yield the best risk-adjusted return for Emily’s globally integrated portfolio?