Fund managers are more likely to invest in companies located in the same country they are based in, revealing a persistent home bias, a study has shown.
This behaviour could be limiting the flow of capital into the EU’s real economy and costing billions in missed opportunities, according to the study by the German Investment Funds Association (BVI).
Based on an analysis of over 300 large global equity Ucits funds representing roughly two-thirds of assets in the segment, the BVI estimated that having more fund managers based within the EU could result in an additional €2 to €3 billion invested in EU-listed companies.
While the number may appear small against the EU’s €14.8 trillion fund industry, it covers just one asset class—suggesting the impact could be far greater in complex areas like private equity, venture capital and infrastructure, where physical proximity and local knowledge matter.
According to BVI, global equity funds with at least one fund manager located in a given country tend to allocate 1 to 2 percentage points more of their portfolio to that country’s equities. While some home bias is rooted in deeper familiarity with local companies, the study highlighted that over 60% of global equity fund managers serving EU investors are based in non-EU countries—primarily the UK and US.
“The study underscores the strategic importance of location policy in Europe’s competition for capital,” said Thomas Richter, CEO of BVI. “Fund manager location isn’t just a question of operational structure; it affects where money flows. Supporting EU financial centres could help redirect capital into Europe’s real economy, boost corporate financing, and even lower the cost of capital for European firms.”
German fund industry grew by 9% year-on-year, shows BVI data
The home bias is likely stronger in private markets. In sectors like infrastructure or venture capital, local fund managers often hold significant advantages in due diligence, regulatory navigation and influence over portfolio companies. According to the BVI, these areas are also central to Europe’s policy priorities, from digitalisation to energy transition and defence.
The EU remains an efficient ecosystem for capital allocation, with fund administration hubs like Luxembourg and Ireland accounting for nearly 60% of total Ucits assets. However, 34% of fund managers in the sample were based in the EU, with London alone home to more managers than the entire EU combined. This dislocation between legal domicile and management location diminishes the EU’s ability to retain capital within its borders, highlighted BVI.
Germany’s BVI calls for private pensions and market data reform
BVI modelled the impact of adding just one EU-based fund manager to teams currently located outside the bloc. For 142 funds managing €380 billion, this shift could yield between €2.0 and €2.9 billion in new investments into 11 EU Member States—with Germany, France and the Netherlands seeing the largest absolute gains.
The study’s findings align with broader political discussions, including recent remarks by European Commission President Ursula von der Leyen, who noted that €300 billion of EU household savings are invested abroad each year—capital that could otherwise help grow European technology, innovation and infrastructure.
The report does not advocate for restrictive regulation that might harm investor returns. Instead, it suggests that creating attractive conditions for fund managers to be based in the EU—through tax, labour and regulatory policies—can help naturally rebalance capital flows.
