The world's biggest investors may be rethinking 20 years of boosting overseas holdings and are instead seeking more stable cash income at home, as aging societies and tighter regulation dull risk appetite.
This heralds a structural shift toward investments that produce long-term income in advanced economies, home to two thirds of the money held by insurers and pension funds - some $55 trillion.
And the lagging of markets in the relatively high-growth emerging economies - now into its third year - may well last far longer as factors pulling western investors back home are likely to persist over the next decade.
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Japan, where those aged 65 or older make up a quarter of the country's population, offers a prime example of what conservative investors are doing with their money.
Despite expectations that cheap Japanese money would flood into international markets, domestic investors brought home record amounts of money in February-March. Year to date, they repatriated as much as 8.48 trillion yen ($83 billion), compared with 2.56 trillion they took overseas in the same period last year.
Globally, pension funds spent the last 14 years expanding their investment frontier overseas, with the weight of domestic stocks in their portfolio falling to 46.5 percent last year from 64.7 percent in 1998, according to a Towers Watson survey.
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But in some parts of the world, the tide may be turning as the share of domestic exposure has either stabilised or risen.
In the United States, home to more than half of global pension assets, the weight of domestic stocks troughed at just above 60 percent in 2011-12; Switzerland and Australia saw a rise from 2011.
In Britain, the share of overseas securities peaked at 35 percent in 2007 before falling to 29 percent in 2011, according to UBS Asset Management. The share of domestic sovereign debt has risen four-fold to 35 percent since 1994.
"When you are retired, you have a very low risk budget. It means for retired households or pension funds, your tendency to export capital and put on currency risks is very low," said William de Vijlder, chief investment officer of BNP Paribas Investment Partners.
"Due to the combined impact of the aging population in almost advanced economies and tighter regulation, the trend is towards a smaller risk budget."
On the fixed income side, there never has been a strong appetite to buy foreign bonds. Among U.S. pension funds, the share of domestic bonds in their debt portfolio has ticked up to 94.1 percent from 92.7 percent in 2009, according to Towers Watson.
In Europe, pension funds and insurance companies are facing "Solvency II", new rules due in 2016 that require them to take on extra capital when they increase holdings of risk assets.
These funds are under pressure because holding low-yielding government bonds earns them nothing, while they cannot take more risks. They have to seek alternative ways to achieve returns.
"Because of the aging population and baby boomers retiring... income becomes quite an important component of a portfolio," said Hans Stoter, chief investment officer at ING Investment Management.
"They have to get out of (low-yielding) bonds and have to get securities that are high yielding without going into growth stocks. These are structural changes in the portfolios rather than tactical allocation."
These long term drivers are unlikely to go away, even as capital flows this year have been driven by factors like western money printing, relative growth profiles and valuations which favoured markets in stagnating developed markets.
A structural portfolio move towards a more conservative approach has resulted in growing appetite for income-producing securities and also defensive stocks that give stable returns throughout economic cycles such as pharmaceuticals.
This makes it hard for growth-sensitive emerging markets to attract capital.
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The rally in developed equity markets accelerated in the past month or so after the Bank of Japan pledged to pump $1.4 trillion into the economy and the European Central Bank cut interest rates.
For Japanese investors, domestic markets are much more attractive not only because Tokyo stocks have risen 50 percent this year but also the yen has fallen 14 percent against major trading partners. (http://reut.rs/10A5rCw)
"The cyclical environment in emerging markets on average has been challenging. You have a big, discretionary, aggressive accommodative policy stance in the U.S. and Japan, that will be a magnet to attract foreign flows," De Vijlder said.
"With all the music and dancing happening here, why would I look elsewhere?"