Investing for the Long-Term: From Saying to Doing

“In a recent study of public and private pension and sovereign wealth funds, respondents overwhelmingly agreed that while the ability to invest long-term is an advantage, they do not necessarily have an effective set of implementation strategies/tools to help them realize their aspirations….”.

Long-term Portfolio Guide—2015
The Focusing Capital on the Long-Term (FCLT) initiative

The FCLT Initiative

The quote above came from the just-released Long-Term Portfolio Guide, a major work-product of the FCLT initiative. Readers of our Letter will recall receiving the key findings of the survey referenced in the quote above in January. The survey was conducted by Ambachtsheer and McLaughlin, and elicited responses from 81 pension and SWF CEOs almost equally distributed between Europe, USA, Canada, and Asia/ Pacific Rim.ⁱ One of its key findings indeed was a serious aspiration/implementation gap in investing for the long term.

The FCLT initiative, initiated by Mark Wiseman of CPPIB and Dominic Barton of McKinsey in 2013, is now supported by a diverse group of influential international investment and corporate leaders. As its name indicates, FCLT’s goal is to refocus investment decisions on the long-term. It is worth repeating the initiative’s motivation:

“Too many investors continue to seek returns on their strategies as quickly as possible. Companies are missing out on profitable investments for fear of missing quarterly earnings guidance. Corporate management significantly undervalues and underinvests in long-term prospects. Savers are missing out on potential returns because stock markets are penalizing companies that make long-term investments. Society is missing out on long-term growth and innovation because of underinvestment.”