Study: Pension Funds Can Work Harder To Be Long-Term Investors

A new paper by Keith Ambachtsheer and John McLaughlin dives into the question: Do pension funds invest for the long term?

Nearly all pension funds would identify themselves long-term investors if asked. But the paper reveals that there is a gap between that sentiment and the funds’ actual investment strategies.

From ai-cio.com:

The authors […] reported a significant gap between the long-term investment aspirations of asset owners and the reality of their strategies’ implementation.

[…]

On long-term investment, the authors said there was “broad consensus” among respondents to the survey that a longer investment timescale was “a valuable activity for both society, and for their own fund.”

“However, there is a significant gap between aspiration and reality to be bridged,” Ambachtsheer and McLaughlin added.

“Here too a concerted effort—both inside pension organizations and among them—will be required to break down these barriers.”

The authors listed the barriers to long-termism: some areas of regulation, a “short-term, peer-sensitive environment”, a lack of clear investment processes and performance metrics, and difficulties in aligning interests with outsourcing providers.

The paper, which also covers governance issues, can be read here.

Photo by Santiago Medem via Flickr CC