The asset management industry is horribly conflicted. On the one hand it is supporting the grassroots drive to encourage big business to adopt sustainable policies. On the other, the majority of investors and asset managers are adopting strategies that destabilise asset prices and promote short-termism. Unfortunately, the latter effect not only undermines the former, but does untold damage to the macroeconomy.
Tell Me MoreThe social utility of an ever-expanding asset management industry is rarely discussed. In this note we distinguish between different strategy types on the basis of their impact on market stability. We argue that destabilising strategies impose a largely unrecognised negative externality on society.
Tell Me MoreMainstream finance theory offers an idealised view of how financial markets work and, as a result, fails to provide practitioners with a useful basis for decision-making. By studying the effects of delegation from asset owners to asset managers, we develop a more realistic and useful understanding of financial markets and point towards actions that would improve outcomes for savers and wider society.
Tell Me MoreThe PW Centre produces and disseminates high-quality research focused on the workings of capital markets and the social efficiency of allocations achieved in these markets.
Visit The Websiteof our latest blogs
Many of the problems of present-day finance have their origins in the horizons set along the investment chain. The key players in this chain are the giant pension, sovereign wealth and endowment funds who appoint external asset managers, who in turn invest in companies. If these funds invest with their eyes set partially or largely on the short term, it sends a clear message down the line and embeds similar standards throughout the capitalist system.
Tell Me MoreThe finance sector is widely recognised as an originator of periodic crises. What is less widely discussed is the unhelpful role that the finance sector can play in amplifying crises that emerge from entirely non-financial origins.
Tell Me More