After the financial crisis, US clients typically held 15% to 20% of their money outside the United States. By 2023 Dan Muzzarelli was seeing that number below 5% in some client portfolios.
The usual case for investing abroad is that something over there is cheap. Muzzarelli does not make it. He says the long run of US outperformance was built on real fundamentals and that people were right to stay in it — and then says the next decade will not repeat it.
"We don't think the next 10 to 15 years are going to look exactly the same."
Muzzarelli runs ETF distribution globally for Franklin Templeton, a firm with people on the ground in 72 countries, and the allocation shift he describes is one he watched in client meetings over 15 years rather than one he read about.
The full interview is covered here so you can skip it.
Here are the 7 principles that matter.
👤 Guest: Dan Muzzarelli, Global Head of ETF Distribution at Franklin Templeton
🎙️ Host: Indrani De, Head of Global Investment Research at FTSE Russell
📰 Published: 14 September 2026 on the FTSE Russell Convenes podcast feed (FTSE Russell)
🟢 Spotify | 🟣 Apple Podcasts | 🔗 Episode page | ⏱️ 13 min
Key Takeaways
US clients went from 15% to 20% abroad after the crisis to under 5% by 2023
He watched the change happen in client conversations, not in a dataset
The US run was earned, which is exactly why it is hard to leave
Start with one broad ex-US holding rather than a country-picking exercise
Build the core first, then add the strategic or tactical positions around it
India, Korea and Japan are three different trades, not one international trade
Europe's financial sector is the counterweight to a technology-heavy portfolio
He puts financials at roughly a fifth of the continent's market
In a commodity country, decide whether you want the metal, the miner or the refiner
Franklin Templeton's ex-US position dates to the 1992 merger, not to this cycle
1. From 20% to Under 5%
Indrani De opened on the gap between what the research says and what investors do, and asked Muzzarelli why anyone should hold anything outside their own country.
His answer is that the home bias got worse for a good reason: "Yeah, I think it's really been an interesting 15 or so years. If you look at post financial crisis, you had a period of US exceptionalism. Equity returns in the US have been phenomenal, so it's easy to see why investors may have forgotten a bit about the world outside of their own home country."
The size of the drift is the number he watched arrive in client meetings: "back post financial crisis, it might have been 15 or 20% allocated outside the US for US clients specifically and then, I mean, as early as 2023 we saw that number below 5% for some clients, which again, for somebody who's been in the industry a while, pretty surprising."
He was careful not to call it a mistake. The period of US outperformance, he said, was driven by a lot of solid fundamentals, so it was no surprise that people stayed in and let the winners run.
What has changed in the last couple of years is that investors have stopped and looked at their own books: "Obviously your home country biases are very comfortable but I think when you look at it from a portfolio perspective and the diversification necessary to sustain volatility, which seems to be very persistent of late, it gives you the opportunity then to look outside of the US to bolster your portfolio and provide diversification to domestic holdings."
2. Start Broad, Not Clever
De asked whether a broad ex-US fund is the right first step for an investor with a very large US position. Muzzarelli did not hedge.
"Of course. Absolutely. I think anything that gets you outside of your home country bias is a good thing."
There are any number of products that give that exposure, he said, "so you don't necessarily need to overcomplicate things."
The order of operations is the actual advice: "And I think a lot of times it's actually better to start simply." That means "Building that core piece alongside the US exposure" — market-cap weighted, or built on factors, whichever suits — and only then building around it if you want to be strategic, tactical, or to express a specific view.
The framework he says his team applies when a client asks is the same three-part one the host named: risk, the benefit of diversification, and the whole portfolio rather than just its equity sleeve.
He also counts waiting as a position with a cost attached: "But again, looking at the different geopolitical landscape to kind of understand some of the risks that you sort of inherit as you're sitting on the sidelines waiting to get into certain markets."
3. India, Korea and Japan
De pushed for the second level — where the dispersion actually is, and which countries are worth naming. Muzzarelli gave three, each for a different reason.
India is a demographic story with a political tailwind: "So as you think about getting tactical, India over the last few years, you've seen the emergence of the middle class. You've seen a pretty favourable political backdrop." He named healthcare, services and internet companies as the industries inside it, and treats the emerging middle class as a growth story that runs for years rather than quarters.
Korea is a technology story: "If you look at something like Korea over the last few years you've seen obviously a huge tech boom." The manufacturing and the innovation coming out of the country are what create the opportunity set.
Japan is a macro regime change: "Japan is one that we see quite a bit. Obviously one of the largest economies in the world. You're finally getting out of that period of disinflation and then now moving into an inflationary period." He said flows into it have grown a lot, which he called no surprise.
Beyond those three, he said, there are plenty of other countries with their own specific reason — technology in one case, commodities in another — and the test is whether the position diversifies away from home-country bias or some other persistent tilt in the book.
4. Policy Before Positions
De put two live worries to him: how narrow the rally has become, and how often the market flips between risk-on and risk-off. His answer started before the portfolio.
"Well, I think the first thing that we do when we work with a lot of our clients, the first thing that we hear from clients and even within our own investment solutions group is, really coming up with an ideology and being solid around investment policy."
The three questions that make up that policy: "Understanding why you're investing in something, what's the thesis behind it and what's the target that you're trying to achieve?" The target might be a risk level or an absolute return; what matters is having the framework and then applying it consistently.
India comes back here as his example of a position that survives regime shifts, because the trajectory is long enough to be held as a multi-year story rather than traded around.
Narrowness cuts both ways, and the useful move is to buy a different point in the same supply chain: "there are stories there of companies in Korea, for example, where you'd have the ability to then sort of look at the manufacturing centre as opposed to maybe the end user of it." The judgment, he said, is which of the two wins over time, and why.
5. Europe as the Ballast
The second half of his answer to the narrow-rally question is the least exciting and the most concrete.
The case for Europe is not growth, it is composition: "I guess the financial sector as a whole is 20 some odd percent of the overall continent." Banks and financial companies are what the region has instead of a technology boom.
That makes it the offset to the position most investors already have. If a portfolio is heavy in technology in the US, in emerging markets or in other developed markets, Europe's financials are what balance it. He called the exposure a relative underweight in most books.
"So some of it might be a bit more boring, but I think it does give you the opportunity there."
Commodity countries raise a second question, which is where in the chain to own the exposure: "Australia as an example from a commodities market, or even Brazil." He said these conversations come down to a choice between holding the commodity itself and holding the companies around it — "Do I want to look at the mining centres? Do I look at the refining centres?" — and the answer follows from understanding who owns what and what drives each stage.
6. Templeton's 1992 Reason
De noted that Templeton is known for emerging markets and for country-level granularity, and asked where that comes from. His answer was corporate history followed by headcount.
"So right when Franklin and Templeton merged back in 1992, a big reason for that was Sir John Templeton's belief in ex-US investing and I think, again, as a firm, we're very proud of that heritage and lineage." He put the firm's history at more than 70 years.
The present-day version of it is physical: "We're in 72 countries across the globe."
"We have a lot of individual research folks, portfolio managers, any number of people who are on the ground and I think it gives us a unique perspective, not only within the firm, but at a very granular level within the countries as well." The argument is that people who live somewhere see the drivers day to day rather than through a headline.
"And I think one of the things that's been really exciting for me in my last ten years at Franklin has been the ability to travel to a lot of those places." What struck him was the speed of the communication now: "You know, it's very impressive to get on calls when you have quite literally the entire globe covered in terms of the people who are discussing research, or feedback, or whatever it is."
He described emerging markets as a core tenet of the firm, with other investment managers layered around it, and said the underlying belief has always been that the world is a bigger place than a US-based firm's home market.
7. No Bad Time to Start
Asked what she had missed, Muzzarelli went back to the opening and turned it into an instruction.
"I think home country bias is comfortable, right?" Markets like these, he said, are the moment to examine your own predispositions.
The reassurance is that this is not a retail problem: "But even the most sophisticated clients that we work with still struggle with these same thought processes." He works with clients of every size.
"So, I think one of the things we always impress upon folks is that there's never a bad time to start to move into international markets."
The bar he sets for starting is deliberately low: "Again, you want to be thoughtful. You want to be concerted in terms of your approach and understanding, but it doesn't have to be super-granular. You can just get started in something big and broad." Then: "Look at the biggest index and sort of work backwards from there, if that's what's helpful for you."
As the world keeps connecting — knowledge, infrastructure, moving parts talking to each other daily — global exposure, he said, "it seems unavoidable for us going forward."
"We don't think the next 10 to 15 years are going to look exactly the same." The instruction that follows is to take the opportunities, diversify outside the US, and hold a thesis and an understanding of the biases you are managing.
Bonus Insights
De set the whole conversation up as a gap between evidence and behavior, in one sentence: "Empirical finance says almost all investors have a home bias and economic theory says we should reduce the home bias."
Her framing of why country-level exposure is worth the effort was that the drivers themselves are not global. "There are multiple drivers of returns and each of those drivers tend to benefit certain countries, which takes us to the point of having more granular exposure." Muzzarelli's country answers track that framing exactly — a demographic driver in one country, a technology driver in another, an inflation regime in a third.
Her description of what investors are actually up against this year was two problems at once: "How narrow the rally has become and also how we are having frequent regime shifts between risk-on and risk-off."
On single-country and single-region positions generally, Muzzarelli called the idea evergreen rather than timely — there is always somewhere with a specific reason to look — and said the more important move is simply doing something to get outside the US.
Muzzarelli's bottom line is that the decision is not which country to buy but whether to own anything abroad at all, and that an investor who has drifted to under 5% outside the US should fix that with one broad holding first and only then decide whether India, Korea, Japan or Europe's banks earns a place beside it.
Products, Companies & Tools Mentioned
Franklin Templeton (Muzzarelli's firm, formed by the 1992 merger that he says was driven by Sir John Templeton's belief in investing outside the US, with staff in 72 countries)
FTSE Russell (The index provider that publishes this podcast; De is its Head of Global Investment Research)
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