Revising Asset Allocation for Global Integration

You are a senior portfolio manager at a global investment firm tasked with revising the asset allocation strategy of a client with a net worth of $10 million. The client's goal is to achieve long-term capital appreciation while managing volatility, and they have expressed a keen interest in incorporating global investment opportunities to enhance diversification.

The client currently has 50% of their portfolio in domestic equities, 20% in fixed income securities, 15% in alternative investments (including hedge funds and private equity), 10% in real estate, and 5% in cash. Recent shifts in global markets, including rising interest rates, geopolitical tensions, and changing economic policies across major economies, have prompted you to reassess this allocation.

Analyze the current asset allocation of the client considering global integration. Discuss the potential benefits and risks of increasing exposure to international equities and bonds, while also addressing the implications for the overall risk-return profile of the portfolio. Additionally, recommend an optimal global asset allocation that aligns with the client’s objectives and the prevailing economic environment.