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Australian super funds tend to pride themselves on their international outlook and the level and diversification of their offshore exposures, notwithstanding the historical volatility of the Australian dollar. However, after adjusting for the size of the Australian market and several other factors, we are ranked only 11^th in terms of avoiding ‘home country bias’.

A German researcher, Helena Kleinert, has written a paper called “Cultural Influences on Domestic and Foreign Bias in International Asset Allocation”.  In it she looked at home country and foreign country biases after considering 15 variables grouped into six categories: economic development, stock market development, capital control, investor protection, cultural dimensions and familiarity.

Australia is ranked 16^th out of the 26 countries studied for home country bias, with an average of 80.8 per cent of institutional investments allocated domestically. But the US is ranked 26^th despite having almost the same level of domestic investment with 80.9 per cent. The country with the highest home country bias was Turkey, followed by Chile, Malaysia, Denmark and Norway.

This is an edited version of the researcher’s table:

Rank       Country    Actual allocation %

1              Turkey               98.6
2              Chile                  79.2
3              Malaysia            95.9
4              Denmark           45.2
5              Norway             42.8
6              Finland              46.4
7              Belgium             48.9
8              Russia               99.6
9              Singapore         46.0
10            Sth Africa          87.5
11            Brazil                 97.5
12            Sth Korea          93.2
13            India                  99.7
14            Sweden            53.9
15            Hong K.            81.3
16            Australia          80.8
17            Spain               87.1
18            Italy                  48.8
19            Switz’land        53.9
20            Canada           73.0
21            France             78.4
22            Holland            26.1
23            Germany         78.4
24            Japan              86.3
25            UK                   62.4
26            USA                 80.9