We have made several adjustments in the Global Equity portfolio. First, we increased our allocation to Asia (becoming less underweight). The additional Asian equity exposure was offset by a modest reduction of our U.S. large-cap equity overweight. Our U.S. outlook remains very positive, and the Global Equity portfolio remains significantly overweight to the U.S. relative its benchmark. Concurrently, within the U.S. equity allocation of the strategy, we made adjustments to account for the creation of the new Communication Services Sector. In conjunction with these adjustments, we also conducted a full rebalance of portfolios.
Increased Asia exposure: We currently see opportunities in Asian equities and have increased portfolio exposure to the region. Fundamentals in Asia, for both developed and emerging economies, are relatively stable and have recently shown signs of improvement. Yet, Asian equities, particularly in emerging markets, had materially underperformed the U.S. in recent months. This pushed some Asian equity valuations to near all-time lows relative to the U.S. To fund the increase of our Asian exposure, we modestly reduced our significant overweight to U.S. equities. Our outlook for the U.S. remains very positive, and the equity allocations of our global strategies remain approximately 10 percentage points overweight to the U.S. relative to the strategy’s benchmark.
Adjusted U.S. exposures to account for sector classification changes: We made several adjustments within the U.S. allocation of the Global Equity strategy to maintain our desired U.S. equity sector exposures as the underlying holdings of several sector-based ETFs in the portfolio changed. As previously announced, Standard & Poor’s and MSCI decided to reorganize their Global Industry Classification Standard (GICS) at the end of September 2018 to create a new “Communication Services Sector.” This new sector combined the former Telecommunication Services Sector with media, advertising, and entertainment companies taken from the Consumer Discretionary Sector, and with certain internet and entertainment software companies taken from the Information Technology Sector. Correspondingly, various ETF sponsors adjusted the underlying holdings within ETFs that are based on the affected sectors.
To account for changes in sector classifications and sector-based ETF composition, we modestly reduced exposure to the U.S. Consumer Discretionary and Information Technology Sectors and added exposure to the new U.S. Communication Services Sector. These adjustments did not reflect any change in our economic outlook or our desired fundamental exposures for the portfolio. Instead, they were intended to keep portfolio exposures in line with our existing outlook as the underlying holdings within certain ETFs changed.