One of the most convincing reasons to have some home bias that I heard was in the context of pension fund benchmarks. Over a long period, there is the risk that some investments may be blocked to us in some part of the world if restrictions are introduced, leading to illiquidity or even loss. An example of this happened last year.
A reasonable home bias diminishes the risk.
To me the diversification in a strategic allocation is about managing the risk, not about optimizing the returns.