Is there a set of global circumstances where DEV/EM perform better? A weakening/strengthening $ ?? Expected slower US economic growth rates vs expected foreign growth rates? It seems to me, rather than owning these highly correlated, lower returning assets all the time, we should identify those sets of circumstances when foreign markets are most likely to outperform and have exposures only during those times. You also failed to discuss how large a portion of SP500 revenues and earnings come from non-domestic sources. Taking this into account, owning DEV/EM exposures might create an unintended overweight to foreign. I think too often we fall in in love with diversification for diversification's sake. We diversify to reduce risk. However, when we reduce risk we definitionally lower returns. I think as practitioners we must be intentional about how and why we diversify rather than just have a lot of different exposures.