In a recent webinar, Beyond Borders: Dissecting Current Investment Trends in International Markets During Volatile Times, BNY experts explored how global diversification is helping investors pursue alpha in a more uncertain environment. They also discussed other ways investors can unlock value today, including securities lending and the proactive management of local market complexity when investing in emerging markets.

A Broader Search for Opportunity

Further international diversification may still lie ahead. According to BNY iFlow data — information on cross-asset investment flows that leverages anonymized and aggregated information from BNY's $62.6 trillion assets under custody and/or administration*— U.S. bonds comprise over 70% of all fixed income holdings under custody globally. “So immediately that number tells you there is concentration risk in fixed income, but also diversification potential,” says Geoffrey Yu, Senior Macro Strategist, BNY. 

 Some markets are already benefiting from diversification flows based on current themes. According to iFlow data, investors have been moving into emerging market energy and commodity equities, South Korean and Taiwan artificial intelligence (AI) oriented stocks, and Latin American fixed income and foreign exchange. 

Diversification is Reshaping Securities Lending Opportunities

As portfolios diversify, securities lending opportunities are becoming more complex — and, in some cases, more attractive. For example, as assets under management in South Korean and Taiwanese equities have increased, BNY has also seen a rise in securities lending performance in those markets. In fact, the top region globally for equity securities lending performance in Q1 was APAC, and according to data going back to 2010, this is the first time that APAC has outperformed the U.S. equity markets in securities lending quarterly revenues.¹ “Clients have seen where those market returns are going,” says John Templeton, Head of Securities Finance Client Coverage. “They’ve taken advantage by enrolling more of those markets into their securities lending programs to generate returns.”

Beyond Alpha: A More Integrated Approach to Value Creation

This shift is part of a broader trend in which investors are thinking more strategically about how to generate value beyond alpha as they diversify. “Liquidity management, collateral management, and securities lending strategies are no longer being managed separately by clients, they are bringing those decisions together as part of an integrated set of financing and portfolio efficiency conversations,” said Templeton.

He added that the conversation with clients is evolving. “The discussions we are having are no longer about how they earn incremental revenues in securities lending. It is about how to implement the right set of capabilities to improve access to liquidity, and how to ensure collateral optimization works in harmony with liquidity management and securities lending programs. The question is not simply how to earn incremental revenues – it is how to build the best set of capabilities.”

ETFs Continue to Expand Globally

Another area being propelled by diversification is ETFs. “Really ETFs around the world are at a record, that’s the headline here,” said Ben Slavin, Global ETF Industry Lead, BNY. “We are seeing this across the board, including record AUM, record flows, and also record trading volumes. Investors are continuing to turn to ETFs as a source for asset allocation, price discovery and liquidity.” The ETF industry has eclipsed the $21 trillion in AUM mark around the world, and actively managed ETFs saw $254 billion in inflows in the first quarter of 2026, up 70% from the same period in 2025. Despite accounting for 11% of total assets, active ETFs have attracted nearly 40% of total inflows, effectively pulling three times their weight.²

Emerging Markets Offer Opportunity but Demand Operational Readiness

Emerging markets are also seeing strong momentum. In BNY’s global custody business, growth in emerging markets investment during Q1 2026 was three times higher than in developed markets. Investors are continuing to look beyond traditional markets for new sources of growth and diversification.

But emerging markets are structurally unique, and they bring significant local complexity in three critical areas — market access, settlement risk, and FX & liquidity management. 

For example, “For ETF investors, FX execution is critical to improve overall fund performance and reduce tracking risk,” says Veronica Brandimarte, Head of Cash & FX Product, Global Custody.

Brandimarte pointed to a recent example in which BNY partnered with a global ETF client through BNY’s FX Plus program to help minimize FX-related slippage. “By synchronizing FX execution with portfolio evaluation, about 90% of FX trades were executed on trade date across three priority emerging markets,” she said. “The result was improved fund performance through reduced slippage, helping solve the timing gap between fund activity and FX settlement, while reducing overall NAV drag and market exposure to FX.”

As investors expand internationally in search of diversification, resilience and performance, success will increasingly depend on more than asset allocation alone. It will require an operating model that can keep pace with market complexity — connecting custody, liquidity, FX, securities finance and execution in a more integrated way.