It would appear that parts of our all-important financial system are broken. Misalignment of interests are common. Short-termism is pervasive. And, sadly, the existential socio-economic challenges of the contemporary period (e.g., climate change, demographic aging, etc.) that are obviously material to the generation of value over the long term have been viewed as secondary concerns for many in the institutional investment community, if they are a concern at all. You have to admit, it’s all rather depressing.
But, perhaps bizarrely, I am not depressed. And here’s why: I see a growing community of long time-horizon institutional investors that includes sovereign funds, public pension funds and endowments, located in cities outside of the major international financial centers (IFCs), that is pushing back against the misaligned incentives present in the for-profit asset management industry. This developing group of beneficiary institutions, which I define as ‘frontier investors’, is re-taking responsibility of the end-to-end management of their assets and rethinking how they allocate capital, particularly through the development of direct investment capabilities, which allows them to bypass third party service providers altogether.
It’s for this reason that Adam Dixon and I just released a rather optimistic paper about the future of finance entitled, “Frontier Finance”. Why so optimistic? Because we genuinely believe that these frontier investors represent a window of ‘locational opportunity’ to remake the map of the investment management industry and, in turn, the very nature and scope through which such organizations engage with sell-side service providers. And we believe that this new map of finance will be better than the one many are using today...
Anyway, read it here. We’d love to get your feedback on it.
