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Investment Innovation - Brought to you by Franklin Templeton

Long-term investors using short-term strategies

There is a contradiction in the way that many long-horizon asset owners behave. On one hand, they are increasingly concerned about the externalities imposed on wider society by the companies they own. But on the other, they tend to ignore the social costs imposed by the short-horizon strategies that they employ such as momentum and tracking error constraints. The transmission mechanism for this social cost is via asset mispricing, which leads to capital misallocation and incentives for CEOs to focus on short-term share price maximisation.
Investment Innovation - Brought to you by Franklin Templeton

Wisconsin’s data solution

David Villa, CIO of the $110 billion State of Wisconsin Investment Board is worried about the outlook for returns. As a result he’s significantly underweight sovereign bonds in favour of cash. But he’s also positioning the organisation to do better analytics for more complicated portfolios, another result of a low return environment. The fund is working on at least five data and technology projects and has hired a chief technology and operations officer.
Investment Innovation - Brought to you by Franklin Templeton

How to build innovation

Innovation is more important than ever given the uncertain and ambiguous times that lie ahead for institutional investors like climate change, political dysfunction and poor returns. “Returns can only come from an ecosystem that works and we need innovation to do this,” said Roger Urwin, global head of investment content, Willis Towers Watson speaking at the Fiduciary Investors Symposium at Cambridge University.