TMP has been experiencing increasing demand from its institutional clients for information and assistance related to international investments. Recognizing that this is an area of growing important e, the firm has hired an experienced analyst portfolio management specializing in international equities and market strategies. Her first assignment is to represent TMP before a client company's investment committee to discuss the possibility of changing their present "U.S. securities only" investment approach to one including international investments. She is told that the committee wants a presentation that fully and objectively examines the basic, substantive considerations on which the committee should focus attention, including both theory and evidence. The company's pension plan has no legal or other barriers to adoption of an international approach, and no non-U.S. liabilities currently exist.
a. Identify and briefly discuss three reasons for adding international securities to the pension portfolio and three problems associated with such an approach.
b. Assume that the committee has adopted a policy to include international securities in its pension portfolio. Identify and briefly discuss three additional policy-level investment decisions the committee must make before management selection and actual implementation can begin.