Systemic risk in the superannuation system likely doesn’t stem from funds themselves, but from their service provider relationships. Regulators need to be thinking harder about where and how it arises – something they’re not necessarily well set up to do.
Big asset owners and managers are embracing the private markets as one avenue for growth, but the complexity that brings to portfolios means they also need to get a better view of what might be decades of siloed information.
Study into what’s exacerbating short-termism
Columbia University in the US has embarked on a study of short-termism among investors, and whether activist investors, company remuneration policies and other factors are contributing to it.
Short-termism has been complained about for many years, but new styles of investing, such as rapid-trade and the addition of momentum to previously deep-value styles, appear to have prompted an acceleration of the problem.
It is not only retail investors who lack the discipline to set better strategic investing targets and stick to them. Peer pressure to perform is strong among many institutional investors, from sovereign wealth funds to endowments. Perhaps it is a part of the digital world of instant access to information and this is feeding off itself.
Ira Millstein, co-chairman of the Millstein Center for Global Markets and Corporate Ownership at Columbia Law School and a senior partner at the law firm Weil, Gotshal&Manges, argues that corporate boards should figure out to whom they owe their fiduciary duties.
Writing for the Dealbook newsletter published by the NY Times last week, Millstein says Columbia, along with studies at other institutions, is trying to learn what motivates short-term investing, why the longer-term shareholders are so often silent and why the investment chain either through apathy or the wrong incentives, has created the world of short-term investing in which we live.
“This undertaking will also examine the role of so-called proxy advisory firms and rating agencies in board policies,” he says.
“In the end, we will all gain a better understanding of shareholder influence, and what incentives can turn this economy away from short-term investing and back to long-term sustainable growth. Corporations will be the ultimate beneficiaries of this knowledge, which will provide the understanding that will facilitate legitimate long-term planning.”
Full article: http://dealbook.nytimes.com/2013/03/08/re-examining-board-priorities-in-an-era-of-activism/?emc=eta1
