Home Bias: Why European Investors Underweight the World (and What It Costs)
A Swiss investor knows Nestlé, Roche and UBS. A French investor sees LVMH, TotalEnergies and BNP Paribas every day. Familiar companies feel easier to judge, and shares quoted in the home currency feel safer. That intuition is understandable. It can also leave a portfolio far more local than the global opportunity set.
Home bias is real, but not automatically irrational
Home bias means allocating more to domestic assets than their share of the investable world. Some of it has reasonable foundations: local tax treatment may be simpler, information can be easier to access, liabilities such as future spending are in the home currency, and investors may prefer companies they understand.
The problem starts when familiarity is mistaken for diversification. A portfolio concentrated in one small national market can be exposed to the same banks, regulation, economic cycle and political risks that already affect the investor's salary, pension and property.
Europe is not the global market
European equities represent only a minority of global listed equity value, while the United States is the dominant market. Switzerland itself is a low-single-digit share of the global market. A portfolio that is 40% or 50% Swiss is therefore making a very large active country allocation, whether or not the investor intended to make one.
That active allocation can outperform. It can also underperform for long periods. The point is not that global weighting is always right; it is that the deviation should be conscious.
Do not use recent US performance as the entire argument
European equities lagged US equities for much of the post-financial-crisis period, which made home bias costly in hindsight. But that history should not be turned into a new bias in the opposite direction. US valuations, sector composition and earnings growth are different today than they were at the start of that run.
Diversification is valuable precisely because the next winning region is not knowable in advance.
Home country and home currency are different exposures
A Swiss multinational can be listed in CHF while earning much of its revenue abroad. A US company can report in dollars while selling globally. Listing currency is therefore an imperfect proxy for economic currency exposure.
For a European investor, going global usually increases explicit USD exposure. That can raise short-term volatility in EUR or CHF terms, but it also diversifies the economic base of the portfolio. Currency risk should be measured, not used as a reason to default to local equities.
A more useful way to measure your bias
Compare your home-country allocation with a broad global benchmark, then adjust the conversation for your real-world liabilities. If your portfolio is 35% domestic while the global market weight is only a few percent, ask what objective justifies the difference: tax, income needs, knowledge, currency matching, or a deliberate investment view.
If you cannot name the reason, the allocation is probably habit rather than strategy.