Global institutional investors are more committed than ever to implementing long-term strategies, according to New Zealand Superannuation Fund (NZS) head of asset allocation, David Iverson.
Iverson said the report published last week by global think-tank Focusing Capital on the Long Term (FCTL) highlights the renewed attention institutional are devoting to the subject.
He said while large investors have always at least talked about the ‘long term’ “now funds actually agree on what it means”.
“I’ve never seen this level of co-ordination between investors before,” Iverson said.
The FCLT ‘Long term portfolio guide’ followed on the back of three papers commissioned by the Australian Future Fund last year that also addressed the issue.
Iverson said in the Future Fund trilogy, author Geoff Warren, Centre for International Finance and Regulation research director, lays out how investors can embed long-term attitudes within their organisations.
“The lesson is that – while we’ll always care about short-term – funds have to institutionalise long-term behaviour across the whole organisation,” he said.
According to Iverson, increasing short-termism undoubtedly creates “excess volatility” and market inefficiencies.
“It’s impossible to say how much inefficiency short-term noise introduces into the market,” he said. “But we can be sure of the direction, if not the magnitude.”
He said as more institutional investors adopt practical long-term processes, short-term volatility could be contained.
In a speech last year, David Neal, Future Fund chief, also talked up the market-changing potential of institutionalised long-termism.
“Today, more than ever, long term investors – be they sovereign wealth funds, superannuation funds, insurance companies or family offices – have an opportunity to reshape the financial system,” Neal said in the speech.
Those wider ambitions are reflected in the FCLT report, which aims to: “… develop practical ideas for how institutional investors might reorient their portfolio strategies and management practices to emphasize long-term value creation and, by doing so, be a powerful force promoting a long-term mind-set throughout the investment value chain.