Using unique data on mutual fund portfolios with different investment scopes, we study the extent of international diversification. Mutual funds invest in a surprisingly limited number of stocks—about 100. The number of holdings from a given region declines as the investment scope broadens. Moreover, unexploited gains exist from international diversification. Funds that invest globally could achieve better risk-adjusted returns by adding stocks held by more specialized funds within the same family. These findings are not driven by different sectoral allocations, lack of information or instruments, transaction costs, or different tail risks. Instead, organizational factors might play an important role.

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