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Building better long-term investment relationships – a Mistra workshop

Increasing numbers of institutional investors are going on record to state that they believe that ESG issues will have a material impact on their financial performance. However, some believe that the way asset owners are structured, including their internal governance and how they measure and pay external asset managers, may be obstacles to truly long-term behaviour.

In June 2009 onValues facilitated a workshop for investment professionals and academics on this very topic on behalf of Mistra, The Foundation for Strategic Environmental Research. The workshop addressed the challenges of the asset owner-manager relationship in two stages:

1. Understanding how investors take decisions, how they are influenced by prevailing beliefs, and which behavioural biases are most dangerous for the long-term investor; 2. Presenting and refining better long-term models for the asset owner-manager relationship
 
Workshop participants expressed strong opinions on the changes needed to encourage long-term investment behaviour, including:

  • Measuring asset managers' financial performance over rolling periods of at least three years
  • Putting a greater emphasis on the manager selection process: asset owners should spend more time evaluating the quality of processes and people at the asset manager using transparent, systematic criteria
  • Above all, the owner needs to give his managers the feeling that they are trusted: the ‹climate of fear› often found in institutional asset managers is highly damaging to long-term investment

The detailed conclusions of the workshop can be found in the report below.

Download the workshop report
«Winning the long-term game – new insights into asset owners' behaviour and their interactions with asset managers»

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