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Investor Economics

Insurance Advisory Service October 2017

Location remains a significant factor for investors, with investors around the world demonstrating a strong bias towards domestic securities. This phenomena is referred to as home bias. Home bias naturally represents both a challenge and an opportunity for asset managers. For those specializing in domestic markets, the home bias phenomena is a clear benefit; however, factors driving home bias can create a barrier for asset managers focused on foreign mandates.

Home bias, when examined through the lens of Canada’s FundLand, appears alive and well. This is particularly true for segregated funds as 79.3% of segregated fund assets were held in funds with a domestic mandate. The beginnings of a shift in investor attitudes appears to be underway, although at a nascent stage. With this shift, opportunity beckons for asset managers specializing in mandates outside of Canada. Opportunity also exists for product managers on the outside looking in to connect with clients and advisors through educating them on the potential merits of geographic diversification.

In this month’s special feature, No place like home: How home bias is alive and well in Canada, we examine the home bias phenomenon in greater detail, documenting it across the entire fund landscape. We begin, however, with a brief public policy history lesson as government action has been anything but a benign factor. The special feature further explores the nature of home bias across the major asset classes, noting the differences in investor preferences for funds with foreign mandates.

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  • Tags: annuities, insurance, Insurance distribution channels, MGAs, segregated funds

  • Date Posted: November 14, 2017