Question A retirement portfolio is a common pool of assets intended to generate stable, long-term growth. Pension funds are intended for employees when they reach the end of their working years and retire. . (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 a growing demand from its institutional clients for information and assistance related to international investments, the firm decided to invest in the international market. The reason why we add international securities to the portfolio mainly has a few advantages and disadvantages. The advantages of investing in international securities are diversification. By investing in different international and domestic companies around the world, you have a greater chance of reducing the overall risk of a portfolio. For example, if the U.S. market begins to suffer from a recession, investors have the opportunity to take advantage of the growth of a foreign market. In reality, this can provide investors with multiple levels of diversification, including geographic, currency and sector, thereby reducing the risks that the performance of a single security or the instability of a single country could negatively impact the performance of the entire portfolio. Safety performance is much less correlated between countries than within the same country. The main reason is that political, economic, institutional factors, etc. that affect security returns tend to vary widely across countries, resulting in relatively low correlations among international securities. For example, political issues in Singapore may affect or influence stock prices in Malaysia, but they have little or almost no impact...... middle of paper ...... it is why investors use it. strategy when there is uncertainty about market developments. There are also other types of financial instruments that fund managers can use in order to reduce the risks the fund faces, such as stocks, swaps, options, etc. For the current case where the committee now wishes to invest internationally, the fund manager or the committee had the necessary knowledge to hedge the exchange rate risk with currency ETFs. There is no denying that investing internationally, for example in stocks and bonds, will generate significant 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 benefit from benefits that will make the fund more liquid and more versatile so that it enjoys more benefits with less risk..