Russell Investments examines how home bias shapes portfolio outcomes, focusing on the tendency for investors to overweight domestic equities despite global diversification benefits. The paper argues this bias has been costly, with many investors materially underexposed to stronger-performing markets. It highlights that U.S. equities outperformed global peers in over 80% of observed years, amplifying the opportunity cost.
Appraising Home-Bias Exposure
FTSE Russell
Research
54 Pages
Key Takeaways
Persistent Allocation Imbalance: U.S. pensions held domestic equities about 10% above global market weights, reflecting a structural overweight relative to the ~59% U.S. share of global indices.
Global Underperformance Gap: U.S. equities outperformed non-U.S. markets in 10 of 12 years, meaning underweighting the U.S. created a consistent relative return drag.
Extreme Country Concentration: Australian equities represent ~2% of global markets, yet local pensions allocate roughly 52% domestically, highlighting severe diversification shortfalls.
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