Views on improving the integrity of global capital markets
10 October 2013

Challenging Industry Norms: The Shift from Short-Termism to Long-Term Performance (Video)

Posted In: Short-termism

When the State Street Center for Applied Research released The Influential Investor: How Investor Behavior is Redefining Performance last year, it examined the forces that will shape the future of the investment industry. As part of its Challenging Industry Norms series that debates critical issues facing the investment industry, CFA Institute teamed up with State Street to take a closer look at whether misaligned interests are transforming the investment profession.

John Rogers, CFA, president and CEO of CFA Institute, and Suzanne Duncan, senior vice president and global head of research at State Street, kicked off the event with commentary that set the theme for the day.

For Blogs and the Enterprise site

Rogers predicted that market behavior has to shift away from bottom-line capitalism to embrace the notion of “fiduciary capitalism.” The future success of the markets requires additional focus on the needs of one’s clients. And with large asset owners — such as pension funds and endowments — gaining greater market prominence, they are less interested in market returns than the actual returns of their specific portfolios. This is especially important because of the multi-generational nature of these funds. The current asset owners must realize that investment risks taken today will actually be paid for by future owners of the funds.

For her part, Duncan provided an overview of key findings of State Street’s Influential Investor report. A theme common to both retail and institutional investors is the misalignment of their actions with their stated investment goals.

Duncan highlighted three areas of misalignment among industry participants:

  • A perceived short-term focus of the market is helping to drive investors’ lack of trust today. Market concerns are leading to increasing amounts of cash holdings in many portfolios. Others are turning to direct private equity investments as a result of their lack of trust.
  • Do investors possess the required knowledge to establish realistic return expectations? Overconfidence in one’s investment knowledge, especially among retail investors, is a contributing factor in the misalignment of actions and expectations.
  • Do investors clearly understand the return they receive on the fees paid to investment managers? Increasingly complex investments further cloud the risk-return tradeoff.

Each of these concepts was discussed in greater detail in both the report and in the panel discussions that followed. Return to the Market Integrity Insights blog for additional commentary on this important topic.

Photo credit:

About the Author(s)
Glenn Doggett, CFA

Glenn Doggett, CFA, was a director of professional standards for CFA Institute. His responsibilities included providing member guidance in applying the ethics and standards of practice policies, supporting related educational and public awareness activities, and working with the Standards of Practice Council of CFA Institute on its initiatives. He was a co-host of the free, live, interactive webinars used by CFA Institute to promote ethical decision making and global best practices. Previously, Mr. Doggett, as a member of the CFA Institute Financial Reporting Policy Group, represented membership interests regarding reporting and disclosures initiatives, including XBRL. Prior to joining CFA Institute, he worked in the financial information sector with SNL Financial, where he focused on the real estate and energy industries, directing the development and maintenance of a financial data storage system. Mr. Doggett holds a BA in economics from the University of Virginia. He was awarded the CFA charter in 2006 and is a member of CFA Society Virginia.

1 thought on “Challenging Industry Norms: The Shift from Short-Termism to Long-Term Performance (Video)”

  1. Janek Karro says:

    A very insightful and thought-provoking presentation.

Leave a Reply

Your email address will not be published. Required fields are marked *

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.