The Shanghai Open

ASSET MANAGEMENT is mostly a rich-world affair. North America, Europe, Australia and Japan between them account for around three-quarters of assets under professional management. The United States is far and away the single most important market. America sets the tone for capital markets everywhere else. Global trading starts when New York opens. Yet...

3w

Stewards’ inquiry

ROBERT FLEMING has a claim to be a pioneer of active asset management. His First Scottish investment trust pledged to invest mostly in American securities, with choices informed by on-the-ground research. Fleming saw that shareholders needed to act as stewards in the governance of the businesses that they part-owned. So once the fund was launched, in...

3w

Frogs and princes

WHO ARE the heirs of Robert Fleming, the 19th-century Scot who saw that America was the coming place to put risk capital? The venture capitalists of Silicon Valley have the best claim. The businesses that loom largest in public equity markets—Amazon, Apple, Facebook, Google, Tesla and the rest—were nurtured by VCs. Venture-backed companies account for...

3w

Taking back control

THE NOTION of the “first 100 days” as critical for a new administration goes back at least as far as Franklin Roosevelt. He first used the term in a radio address in 1933, shortly after becoming America’s 32nd president. Private equity has its own version. The 100-day plan sets priorities for a bought-out business. The new owner looks for “quick wins”—standard...

3w

Double trouble

SOMEONE WISE once said that all the problems of capitalism are agency problems. Agency costs arise when somebody (the principal) delegates a task to somebody else (the agent) and their interests are at odds. In the textbook example, the principal is a manager, the agents are employees. It is in the manager’s interest that the agent works hard. The more...

3w

Doctor’s prescriptions

“THERE ARE two kinds of forecasters,” said the economist John Kenneth Galbraith. “Those who don’t know and those who don’t know they don’t know.” Asset management is a business built on the notion that the future is somewhat knowable, even if in large part it is not. So we must look for omens. Today’s “dishevelled” or “inchoate” borrower should not...

3w

Passive attack

THE STORY of a quiet revolution in asset management begins with Jack Bogle. Actually, it starts in 1974 when Paul Samuelson, an economist and Nobel prizewinner, published an article in the Journal of Portfolio Management arguing that the bulk of mutual-fund managers should go out of business. Most failed to beat the market average and those that did...

3w

The money doctors

IN MARCH 1868 a prospectus appeared for a new kind of money-market scheme. The Foreign & Colonial Government Trust would invest £1m ($5m at the time) in a selection of bonds. For £85 an investor could buy one of 11,765 certificates giving an equal share. The trust promised a 7% yield. Its aim was to give “the investor of moderate means the same...

3w

Sources & Acknowledgments

Books COVID-19 and Trade Policy: Why Turning Inward Won’t Work, edited by Richard E. Baldwin and Simon J. Evenett, CERP Press, London, 2020 Articles and other sources On the learning potential of unexpected disruptions, by Michele Acuto, Shaun Larcom, Ferdinand Rauch and Tim Willems Central bank bond purchases in emerging market economies, by Yavuz...

Oct 2020

Survival of the fittest

THE GROWTH of remote working is the latest iteration of a decades-long technology shock. It began in the 1990s when personal computers took over offices, continued with the development of the smartphone and social media in the 2000s, and in the 2010s led to cloud computing and artificial intelligence. It has contributed to two features of the world...

Oct 2020