what does that really mean
increases return for a given level of risk
expands opportunity set for investments (allows for active management).
Very well diversified, include all sorts of investments.
as cp pointed out , if there is a asset class with a lot of world wealth held , and it satisfies all the other constraints ( i.e. homegeneity , exclusion , diversification ability ) , but the investor chooses to ignore it , then her portfolio should be less efficient than ideal , plus she is losing opportunities for greater return ( fishing in a smaller pond )
I think this should say “the asset CLASSES (plural) as a whole should make up a preponderance of world investable wealth”.
This means that, for Strategic Asset Allocation, the asset classes specified should include any asset class that is big enough to matter.
Baseball cards or collectibles alike may be neglected (the other asset classes together still make up most of the wealth in the world). But if you disregard stuff such as international equities or real estate, you’ll be missing a big part of the picture.
Once you get all the relevant asset classes, you can enjoy the benefits mentioned by the posters above - better risk-return from diversification and more diverse possibilities for active management to explore.
Agree with Crazyman