Question A pension portfolio is a pool of common assets intended to generate stable growth over the long term, pension funds are provided to employees when they reach the end of their working years and pension. (Investspodia US, pension fund 2014) Based on the case study, TMP currently only invests in the US securities market, which also invests domestically. Due to the growing demand from its institutional clients for information and assistance relating to international investments, the company has decided to invest in the international market. The reason for adding international stocks to your portfolio mainly has some advantages and disadvantages. The advantages of investing in international stocks are diversification. By investing in diverse domestic and international companies around the world, there is a greater chance of reducing the overall risk of a portfolio. For example, if the US market begins to suffer from a recession, investors have the opportunity to take advantage of growth in a foreign market. In reality, this can offer investors multiple levels of diversification, including geographic, currency and sector, thereby reducing the chances that the performance of a single security or instability in a single country could have a negative impact on the performance of the entire wallet. Stock returns are much less correlated between countries than within a country. The main reason is that political, economic, institutional factors etc. that influence security returns tend to vary significantly between different countries, resulting in relatively low correlations between international securities. For example, political issues in Singapore can influence or influence the stock price in Malaysia, but it has little or almost no i...... middle of paper ...... is why investors use this strategy when there are uncertainties about what the market will do. There are also other types of financial instruments that fund managers can use to reduce the risks the fund faces, such as stocks, swaps, options and so on. For the current case where the committee now wanted to invest internationally, the fund manager or the committee had to possess the knowledge on hedging exchange rate risk with currency ETFs. There is no denying that investing internationally, for example in stocks and bonds, will generate large amounts of returns and also provide a greater degree of portfolio diversification, but there is also exchange rate risk. By engaging in exchange-traded funds (ETFs), the fund can enjoy benefits that will make it more liquid and versatile so that the fund enjoys greater benefits with less risk.