Capital Allocation

'Investment professionals have always played an important role in financing the economy through the provision of equity and debt, but in recent years have stepped up their activity to fill the vacuum created by the partial withdrawal of bank credit.'


The investment profession provides new capital through primary markets. This new capital may take the form of debt or equity and may be issued publicly or privately. In addition, investment professionals participate in the secondary market as buyers or sellers of existing securities and, in doing so, set the prices for those securities.

Once capital has been provided, investment professionals act as its stewards on behalf of their clients to ensure efficient allocation to those locations where it can properly and most productively be applied. In primary markets, borrowers (companies and countries) compete to attract capital based on investors’ perceptions of the balance of future risk and reward.

Investment professionals believe that they provide an important role in capital allocation by assessing the appropriate cost at which to provide capital by undertaking in-depth financial analysis. Their analysis incorporates the company or sovereign credit’s financial information, its operating environment and its governance. Stakeholders also note that investment professionals’ reliance on accurate, relevant, consistent data has led them to contribute to the improvement in the quality of the data provided to the market over time.

Read more in our report.

Find out what CFA UK are doing to tackle the challenges and how you can get involved.

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