Our ambition is to help Long Term Investors become organic investors, which means having strong internal capabilities and high levels of sophistication
Ashby Monk & Rajiv Sharma, Global Projects Center Stanford University
18
May
2016
|
12:36
Europe/Amsterdam

ARTICLE : 'Organic Finance' - The incentives in our investments products

'Our paper is a ‘call to arms’ for asset owners, institutional investors and indeed economic geographers to pursue transparency and understanding in the inputs to financial returns. Our ambition is to help Long Term Investors become organic investors, which means having strong internal capabilities and high levels of sophistication. It also demands a reduction in the layers of intermediaries, complexity and abstraction. Organic investors will be disciplined about understanding the incentives they are creating with every investment, which means they are committed to getting transparency around fees, costs and expenses. By uncovering the true cost of intermediation – and the alignment of interests that go with it – organic investors will find new ways to cultivate opportunities that are more aligned with their own long-term interests.'

Summary

Ashby Monk and Rajiv Sharma of the Global Project Center of Stanford University argue that: 'The increasing complexity and indeed de-localization of finance has allowed for an obfuscation of fees and costs that asset managers, implicitly or explicitly, charge to asset owners. This obfuscation has, in turn, led to a distortion in the underlying incentives that asset owners set for our entire capitalist system. In this chapter, we argue that this distortion is driving an increasingly short-term and disconnected financial world. We also argue that a more professional and engaged community of asset owners that can truly understand the ingredients and incentives in financial products is needed.'

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09
May
2016
(pdf)