There are few industries in the modern Australian economy that enjoy such government mandated money flows as funds management.

Whether you agree with the superannuation surcharge or not, it has turned the domestic funds management industry into a global behemoth and attracted many of the world’s largest fund managers to our shores.

The big question that the industry and investors need to face up to however is whether the superannuation surcharge, the Future Fund, mergers and acquisitions and the private equity appetite for Australian listed companies is going to force a fundamental reassessment of where Australian investors put their money.

On the demand side, is this avalanche of money seeking Australian public companies about to expose the complete lack of quality stocks now available in the domestic market and make the domestic market simply too expensive for most overseas investors?

On the supply side, the numbers also look staggering in terms of the potential reduction in large scale quality stocks for fund managers to invest in. If Rinker, Coles and Qantas all disappear from the exchange this year fund managers have seen their investable universe decline not by billions but by tens of billions. This will have happened across several sectors not one.

Most domestic fund managers are increasingly left in the unfortunate position of having to chase stocks which are not becoming more expensive due to better management or improved growth profiles but simply because there is nowhere else to put their – your – money.

A US Fund Manager once said to me a few years back that an Australian value stock was an oxymoron. This was perhaps an exaggeration however, is there really such thing as value in the Australia market anymore or is it simply a marketing ploy?

The issue is whether domestic fund managers and investors are prepared to become global in their investment outlook. The industry needs to have a “Telstra” moment.

The “Telstra” moment occurred when the first tranche of the Telstra privatisation caused an explosion in individual share ownership in this country.

A similar event is required to cause a diversification into international share ownership; otherwise at the current rate our choices will soon be limited to mining-turned dot com-turned mining companies, private equity firms refloating “restructured” companies or big financials.

That will not be a good outcome for the superannuation accounts of Australians.