Weekend Reading

Coming to you _live_ from a very bouncy airplane making its way up to Calgary, here’s your weekend reading. I’ve got some good stories and two research papers for you this morning…


First, here are today’s top stories:

- Australia’s UniSuper raises its game through the development of in-house capabilities. Nice.

- Why did OMERS launch a direct venture capital arm, you ask? Read on...

- Norges Bank Investment Management: ‘FYI, we kinda saved the day before.’ ‘What’s that? Can we do it again? Actually, no.’

- So many emerging managers are coming to CalPERS EM Forum that it had to be moved from CalPERS HQ to... the main floor of the Convention Center!

- The Australian Future Fund is “concerned” by the political risks embedded in European infrastructure investments.

- The IMF tells Guyana to set up a new sovereign wealth fund.

Second, here are two interesting research papers for your reading enjoyment:

- Friend-of-the-show Dane Rook has just published a new paper in the Journal of Sustainable Finance & Investment entitled, “How can we know if investors are coherently linking sustainability concepts?” Here’s a blurb: “Successful long-term investing is problematic. It requires cultivating wide-ranging, global perspectives on many seemingly disparate topics. Yet, breadth must be balanced against coherence, as relationships between these perspectives are woven into systems of understanding. Incoherence of such worldviews may spawn inconsistent and biased investment decision-making that leads to unintended consequences. Successful long-term investors, like their short-term counterparts, must identify and act upon relationships that influence investor behaviours and market outcomes. Unlike short-term investors, however, long-term investors cannot substantially privilege correlation over causality in their efforts... Investors’ abilities to coherently link sustainability concepts from across diverse domains may dictate success in navigating long-term complexities. A coherent understanding can avoid unintended consequences and mitigate governance conflicts for institutional investors. Analysis of whether investors are coherently linking sustainability concepts presents an underexplored empirical challenge for both psychology and finance. This article presents a methodology for measuring how coherently investors link sustainability concepts.” It’s a nice read with some thought provoking arguments.

- Gordon Clark and I have released another working paper over on SSRN entitled, “The Geography of Contract in the Global Financial Services Industry”. Trust me. It’s not quite as boring as that title makes it sound. Here’s a blurb to prove it:

In this paper, we focus upon the contractual relations between beneficial financial institutions and their service providers, emphasizing the forms and functions of contractual agreements with investment management providers. We explain how and why these contracts are quite different from the contracts that bind together firms and suppliers in commodity producing industries. Many contracts for investment management services can be terminated at will. Nonetheless, they are used to provide frameworks for governing relationships in the context of risk and uncertainty rather than being simply instruments to manage the supply of services. We explain how and why the jurisdiction in which these contracts are written matters to parties on both sides of the market.

OK fine...You’re right. It is a bit boring. But it is vitally important for institutional investors to better align interests with their asset managers, and this can really only happen at the level of the underlying contract. So please read and send us comments.

Anyway, have a fantastic weekend!