Institutionalizing Countercyclical Investment

Released on by Bradley Jones
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  • Institutionalizing Countercyclical Investment Book Detail

  • Author : Bradley Jones
  • Release Date : 2016-02-29
  • Publisher : International Monetary Fund
  • Genre : Business & Economics
  • Pages : 43
  • ISBN 13 : 1513512498
  • File Size : 76,76 MB
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Institutionalizing Countercyclical Investment by Bradley Jones PDF Summary

Book Description: Do portfolio shifts by the world’s largest asset owners respond procyclically to past returns, or countercyclically to valuations? And if countercyclical investment (with both market-stabilizing and return-generating properties) is a public and private good, how might asset owners be empowered to do more of it? These two questions motivate this study. Based on analysis of representative portfolios (totaling $24 trillion) for a range of asset owners (central banks, pension funds, insurers and endowments), portfolio changes typically appear procyclical. In response, I suggest a framework aimed at jointly bolstering long-term returns and financial stability should: (i) embed governance practices to mitigate ‘multi-year return chasing;’ (ii) rebalance to benchmarks with factor exposures best suited to long-term investors; (iii) minimize principal-agent frictions; (iv) calibrate risk management to minimize long-term shortfall risk (not short-term price volatility); and (v) ensure regulatory conventions do not amplify procyclicality at the worst possible times.

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Commodity-based Sovereign Wealth Funds

Commodity-based Sovereign Wealth Funds

File Size : 26,26 MB
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Commodity-based sovereign wealth funds (SWFs) have been at a crossroads following the recent fall in commodity prices. This paper provides a framework for commo