And I've also talked with Schoenfeld over the years on a variety of occasions for different stories and publications. He has always been at the top of my list for providing expert analysis on investing matters.

But my favorite topic to address with Schoenfeld always relates to his overriding passion of studying the convergence of indexing and global market forces. In our most recent discussion, he related the wonder of being a 22-year-old Fulbright scholar at the University of Singapore and watching history being made from a front-row seat.

"It was in the mid-80s, and the Singapore exchange had formed a partnership with the Chicago Mercantile Exchange," Schoenfeld recalled. "It was the first foreign exchange to be linked. You could buy a futures contract in the U.S. and get out of it in Asia."

But with many arguing that short-term correlations between the U.S. and developed foreign markets remain at historically high levels, I had to ask him about the logic of global portfolio diversification. "If you look at long-term diversification benefits for a global portfolio, they definitely still exist," Schoenfeld said.  

A good recent example he points to is emerging markets. While they've taken their lumps in the past six months along with developed international markets, Schoenfeld notes that many key developing markets have held up better - and with less volatility.

Northern Trust's starting point for most institutional investors in a diversified portfolio (including the U.S.) is at least 10% in emerging markets. Excluding the U.S., that would equate to about 20%.

Schoenfeld's strongly in the camp of those who see real structural change in emerging markets. He argues that developing countries have significantly fortified their local currencies and economies while strengthening their financial institutions to operate as fluid and fully functional systems.

Operational Constraints A Key Factor

"As global asset managers, a key factor we monitor is any operational constraints in developed and emerging markets," Schoenfeld said. "And we continue to see emerging markets make steady improvement, with a few exceptions such as Colombia and Greece."

Greece has been considered a developed market. But it has been put on FTSE's watch list for possible demotion into emerging markets indexes.

Schoenfeld points to that example to show how small the world has really become these days. "There are more groups watching out for shareholders rights and trends than ever before," he said. "At the same time, what's bad for one country doesn't drag down all emerging markets."

Some of the most interesting countries to him for adding to core international holdings are Ireland and Portugal. He's also bullish about the prospects for Singapore, which he believes is positioned with a strong currency and economy to become the Switzerland of Asia.

And with Israel set to graduate to developed market status in June in FTSE indexes, Schoenfeld says broad reforms and continuing improving conditions are in the cards for many developing nations in coming months.

"These countries have some interesting and unique diversification attributes," he said. "After a weak opening to the year, we're seeing relative strength in some of these markets at a time when other parts of the developed world are still suffering from market dislocations."

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