Date: 19.04.16 Category: Ethics & Professionalism
During the 19th and 20th centuries, companies needed large public equity markets to raise capital to fund large-scale manufacturing. That’s no longer the case, according to economist John Kay. Investment managers should focus more on being the conduit between investor capital and start-up and growing businesses, instead of trying to outperform standard indices.
“The profession is spending too much time chasing alpha and not enough time enhancing beta and for the economy as a whole the value comes from the latter, not the former,” he says. “Looking forward, I see asset managers having a very large role but not one where I see public equity markets being a central feature.”
Kay believes there’s room for enhancing returns from public equity markets and a genuine focus on stewardship would be a positive step. Often investment portfolios have far too many stocks – the benefits of diversification run out fairly quickly, he says. Instead, Kay recommends concentrated portfolios that can allow investment managers to guide companies to greater returns.
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