Focusing Capital on the Long Term: From Talking to Walking


The title of this Letter was also the title of a workshop for Dutch pension fund managers organized by Kempen Capital Management in Amsterdam this past March.

As the title suggests, the goal of the event was to move participants from talking about the merits of ‘long-termism’ to actually living it. The program started with two ‘context’ presentations, one by McKinsey’s Dominic Barton about the ongoing ‘short-termism cycle’ that must be broken, and one by this author about what academia has to say about the ‘short-termism’ problem, and if shifting to ‘long-termism’ really increases investment return prospects.

This Letter summarizes the Barton message, and sets out mine in some detail.

The FCLT Initiative

The Focusing Capital on the Long Term initiative was kick-started by Dominic Barton and CPPIB’s Mark Wiseman three years ago. Its stated goal is to break the ‘short-termism’ cycle that rotates from a perceived need by investors for short-term performance to a perceived need for continuously positive quarterly earnings guidance by corporate boards and senior management. The result is a systemic underinvestment in the kind of longer-term value-creation that retirement savers need to generate adequate, affordable post-work income streams.

In the Amsterdam workshop, Barton listed three steps needed to break this ongoing value-destroying ‘short-termism’ cycle:

1. Shift the focus of corporate boards to supporting long-term value-creating initiatives.

2. Shift the focus of institutional investors to investment strategies that recognize the importance of corporate long-term value-creating initiatives.

3. Create an environment of constructive dialogue and active engagement between the corporate and investment communities.


Keith AmbachtsheerDirector Emeritus of the International Centre for Pension Management at the Rotman School of Management, University of Toronto (Canada), and Editor of RIJPM the Rotman International Journal of Pension Management.