Australian investors have too much of a home bias which will cost them returns in the long term, an investment analyst has said.

"Australian fund managers are too busy measuring themselves against their peers rather than looking outside their index box," Investec strategist Michael Power said.

"They have not yet been punished for this approach as the Australian markets have been performing very well."

He said the increasing number of global corporate investors will affect the price of Australian companies.

Eventually, the price-to-earnings ratio of local companies will be higher than that of global companies.

Power said the old world of Western economies was being eclipsed by the new world of emerging markets.

"In the top eight growth contributors in the next decade, only one is a developed country," Power said.

He said Australia's export markets were well placed geographically.

"Australia is particularly well positioned geographically to take advantage of the growing economies in Asia, including China and India. By 2020, China and by 2040 maybe even India will overtake the US economy in size," he said.

"Australia may be politically in the West but economically it is in the East."

He said home bias has already cost US investors, with government bonds outperforming US stocks over a 16-year period.

"Is the US government more profitable than the US private sector?" he said. 

Despite their preference for US equities and bonds, some US pension funds are now looking at overseas investments in order to fund their deficits, Power said.