... same exposure to the UK country factor. It does not matter whether this company is a multinational or a company only operating within the borders. This is like diversifying industry sectors; when a portfolio manager will pick shares in different sectors thus will eliminate sector influences, meaning the portfolio will not follow a sector pattern. I.e. when it shares go down not all share will go down, this is using the same principal but on a wider scale. In general diversification gives reduction in portfolio volatility and higher overall returns so theoretically international diversification will give even lower volatility because it has reduced country risk as all shares and stocks are not from the same country. Portfolio managers always look not only to reduce risk but also find the best returns, in the past non-UK equities has indicated and performed well providing better risk- adjusted returns than UK equities. The ...

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