Third Annual Sovereign Wealth Fund Conference

Long-term Investing: An Optimal Strategy in Short-term Oriented Markets

December 12, 2013 • 6-8PM

Columbia University, Faculty House, Presidential Room

  • Jeremy Grantham, Co-Founder and Chief Investment Strategist, Grantham Mayo Van Otterloo (GMO)
  • Joseph Stiglitz, University Professor and Co-chair, Committee on Global Thought, Columbia University

In recent decades, investment horizons have dramatically shortened. Two critical issues emerging in this environment are whether long-term investing is optimal; and if so, are particular mechanisms required to facilitate such investments? This conference delved into such concerns by examining:

  • How does long-term investing add value?
  • What incentive and governance mechanisms support the implementation of long-term investing?
  • Can environmental and social corporate governance (ESG) factors increase the success of long-term investing?
  • Are long-term forecasting and valuation path dependent?

By examining these issues the conference bridged information gaps between academic research and fund managers about long-term investing in short-term oriented markets.

Papers

Part of the Sustainable Investment CGT Signature Research Project.

Papers

The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance (Eccles, Ioannou & Serafeim, 2011)

  • Robert Eccles, Professor of Management Practice, Harvard University
  • Discussants: Danyelle Guyatt, Investment Manager, Catholic Super Fund

Robert Eccles presents his paper on the consequences of corporate sustainability on organizational processes and performances, which compares the 90 high sustainability and 90 low sustainability companies. Danyelle Guyatt served as discussant. The presentation was followed by a discussion with the audience.

Transcript: Eccles, Guyatt, Culture of Corporate Sustainability | Watch the video.

A Theoretical Analysis of Value and Momentum Strategies (Vayanos & Woolley, 2012)

  • Paul Woolley, Senior Fellow, London School of Economics
  • Tano Santos (discussant), Franklin Pitcher Johnson, Jr. Professor of Finance and Economics, Columbia Business School (comments presented by Patrick Bolton)
  • Jakub Jurek (discussant), Assistant Professor, Economics, Princeton University

Paul Woolley presented his paper on a rational model that addresses momentum versus value investing, considering, amongst other factors, the agency problem. Tano Santos and Jakub Jurek served as discussants. The presentation was followed by a discussion with the audience

Transcript: Woolley, Santos, Jurek, Theoretical Analysis of Value and Momentum | Watch the video.

Natural Expectations, Macroeconomic Dynamics and Asset Pricing (Fuster, Herbert & Laibson, 2011)

  • David Laibson, Robert I. Goldman Professor of Economics, Harvard University
  • William Goetzmann (discussant), Edwin J. Beinecke Professor of Finance and Management Studies, Yale University
  • Jan Svejnar (discussant), James T. Shotwell Professor of Global Political Economy, School of International and Public Affairs, Columbia University

David Laibson presented his paper exploring the impact of under-estimating long-term mean reversion, demonstrating the effects on asset pricing, consumption and excess returns. William Goetzmann and Jan Svejnar serve as discussants. The presentation was followed by a discussion with the audience.

Transcript: Laibson, Goetzmann, Svejnar, Natural Expectations | Watch the video.

L-Shares: How to Reward Long-Term Investors  (Bolton & Samama, 2012)

  • Patrick Bolton, Barbara and David Zalaznick Professor of Business, Finance and Economics, Columbia Business School
  • Frédéric Samama, Head of the Steering Committee, Sovereign Wealth Fund Research Initiative (SWFRI)
  • William Bratton (discussant), Deputy Dean and Nicholas F. Gallicchio Professor of Law, University of Pennsylvania
  • Max von Bismarck (discussant), Partner and Chief Executive Officer Europe, SkyBridge Capital

Patrick Bolton and Frederic Samama presented their paper on the issuance of a loyalty warrant to reward long-term investors. William Bratton and Max von Bismarck serve as discussants. The presentation was followed by a discussion with the audience.

Transcript: Bolton, Samama, Bratton, von Bismarck, Loyalty Shares | Watch the video.

Keynotes

Some Pros and Cons of Long-Term Investing

  • Jeremy Grantham, Co-Founder and Chief Investment Strategist, Grantham Mayo Van Otterloo (GMO)
  • Introduction: Paul Woolley, Senior Fellow, London School of Economics

Renowned investor Jeremy Grantham discussed his experiences with long-term investing, including a detailed discussion of bubbles. He concluded with the warning that immediate and drastic steps are needed to address global warming.

Transcript: Grantham Keynote Address | Watch the video.

Long-Term Investing and the Evolution of Capitalism

  • Joseph Stiglitz, University Professor and Co-chair, Committee on Global Thought, Columbia University
  • Introduction: Patrick Bolton, Barbara and David Zalaznick Professor of Business and Economics, Columbia Business School

In this keynote address, Joseph Stiglitz contextualized market short-termism in the broader evolution of capitalism, from the emergence of the corporation to the lengthy investment agency chains we have today, and argues that our current form of capitalism enables exploitation. A discussion with the audience, moderated by Patrick Bolton, followed.

Transcript: Stiglitz, Keynote Address | Watch the video.

Panels

Sovereign Wealth Fund Governance for a Long-Term Investment Horizon

  • Mats Andersson, CEO, Fourth Swedish National Pension Fund (AP4)
  • Pal Haugerud, Director General, Asset Management, Norwegian Ministry of Finance
  • Philippe Ithurbide, Global Head of Research, Analysis and Strategy, Amundi
  • Adrian Orr, Chief Executive Officer, New Zealand Superannuation Fund
  • Moderator: Andrew Ang, Ann F. Kaplan Professor of Business, Columbia Business School

This panel featured a debate about optimal governance structures for long-term investment. SWF representatives describe the governance of their funds, including issues of transparency and risk management, followed by questions from the audience on investments in Europe, the derivatives market and building a portfolio for the long-term.

Transcript: SWF Governance for a Long-Term Investment Horizon | Watch the video.

Sponsoring Organizations

Sovereign Wealth Fund Research Initiative

The Sovereign Wealth Fund Research Initiative (SWF RI) was established in 2009, bridging the gap between academics, policy makers and fund managers to identify new and innovative solutions for sustainable capitalism. The SWF RI is an independent organization and is partly sponsored by Amundi Asset Management, a subsidiary of the Credit Agricole Group. CGT and SWF RI collaborate on programming related to sovereign wealth funds.

Amundi Asset Management

Amundi was formed by combining the asset management expertise of two major banking groups: Crédit Agricole and Société Générale. This partnership reflects the two groups' shared vision of asset management responding to the new challenges facing the industry and allowing them to serve their clients more effectively.

With €675.5 billion in assets under management, Amundi is one of the world market leaders in asset management. Amundi has management teams operating in the major financial centers in Europe (Paris, London, Milan), in Asia (Japan, Hong-Kong, Singapore), Australia and the US. Amundi has a strong local presence and is committed to offering its clients a relationship defined by both proximity and a long term view. It actively manages all asset classes and main currencies (Euro, Yen, Dollar, Sterling).

Amundi pledges to respect the Principles for Responsible Investment (PRI). As one of the market leaders in asset management, Amundi Group has to be both exemplary and has to assume significant responsibilities in terms of transparency and conducting its activities with a long-term view.

Caisse des Depots et Consignations (France)

The Caisse des Dépôts group is a "public group serving general interest and economic development". Created in 1816 to restore confidence following the financial crisis after the Napoleonic wars, its first task is to "receive, conserve and return the values entrusted to it". From there onwards, its missions have kept growing to correspond to the country's pressing issues.

Credit Agricole CIB

Crédit Agricole CIB is the Corporate and Investment Banking arm of the Crédit Agricole Group, the world's thirteen largest, Europe's third-largest and France's first-largest bank on the basis of Tier 1 capital (The Banker - July 2010). The Group is present in 70 countries and has 162,000 employees worldwide.With around 13,000 employees in more than 50 countries, Crédit Agricole CIB offers its clients a comprehensive range of products and services in capital markets, brokerage, investment banking, structured finance, corporate banking and international private banking.

Center for Global Economic Governance (SIPA)

Led by Committee member Jan Svejnar, CGEG generates pioneering policy-oriented research on global economic governance, stresses excellence and recognition, and achieves visibility and impact. Launched in 2012, it aims to bring together key players from the academic, policy and business world, and aspires to produce a new wave of policy-oriented research on global economic governance.