Raising a glass to research

Prosperity and academic excellence often go hand-in-hand. James Norris attends Pioneer Investments’ ­European Colloquium in Iseo, Lombardy where, centuries ago, Benedictine monks were given tax breaks to cultivate the Franciacorta vines that helped underpin the region’s economic ascendance.

The global financial crisis seems a long way from the balmy shores of Lago d’Iseo, where the ISEO Institute Summer School habitually welcomes the world’s brightest post-graduate students to debate and improve their economic expertise.

Pioneer Investments’ European Colloquia series, launched in 2006 in association with the Institute – and also at Iseo this year – is gathering something of a reputation of a mini Davos, drawing distinguished speakers headed by Nobel laureates in economics and finance to advise on pressing financial and investment issues.

This year, the event featured no less than three Nobel laureates: Chris Pissarides (2010); Robert Engle (2003); and James Mirrlees (1996), who addressed the theme of “An Era of Macro and Micro Frictions”.

“Friction?” observed Pioneer’s feisty chief executive Roger Yates. “That is something of an understatement.”

Mingling with 150 of Pioneer’s guests from around the world were other academic luminaries, such as Robert Wescott, president of Keybridge Research (as well as economic adviser to former US President Bill Clinton and the new chairman of Hermes BPK Partners), and Axel Boersch-Supan, professor of macroeconomics and public policy at Max Planck Institute in Munich.

Gathered on the terraces, with their erudite theses and reference footnotes ready for battle in several languages were Riccardo Venchiarutti, deputy chairman of ISEO Institute, and Marco Buti, director-general of economic and financial affairs at the European Commission. Spotted in relaxed mode was Arrigo Sadun, executive directive of the International Monetary Fund. But it wasn’t all canapés and conviviality.

Engle, a ­professor at New York University, presented a paper on “Portfolio Lessons from the Crisis” – that is, the last crisis, in 2008. He focused on risk management, concluding: “Make sure you take only the risks you intend to take; pay attention to long-term risk and short-term risks; and consider reducing exposure to long-term risks by hedging.”

Pissarides, a professor at the London School of ­Economics, discussed the different types of savings instruments that need to be matched to the employment state of the investor and the aggregate economy.

An engaging speaker, there was nonetheless a mixed reception for his idea of generating extra liquidity (and no doubt i­nvestment business) via equity release schemes from Europe’s wealthy, asset-rich but cash-poor elderly, whom he described as the most privileged generation in history.

The highly distinguished Mirrlees offered an Asian ­perspective as professor at the Chinese University of Hong Kong, with a discourse on “Global Imbalances and Policy Frictions”.

He covered the distribution of capital, optimal national savings policies, growth, demand and fiscal expansion, and outlined how China and the emerging economies compared to the global economic picture.

Wescott, who moves with awesome ease between the world of politics, investment banking and academia, picked out a number of trends which together amount to a “quiet revolution” in the investment sector.

“We are living a transition from a world with an ­all-encompassing welfare state and lifetime employment in big ­business, to a flexible world where the individual must take ­responsibility,” he noted.

Among the big themes offered for contemplation were the democratisation of finance; flexibility in ­accumulation and drawdowns in pre-retirement, retirement in its various phases; and the need for guidance and support for the “instividual”.

Delegates considered inter-generational trends, business cycles and structural shifts.

But of solutions for, as one delegate noted, “the next 18 days, not the next 18 years”, there was none.

But I asked guests to remember that the European Commission had not been idle in the past weeks and months, as Europe’s sovereign debt crisis unfolded.

“Extraordinary things have happened in terms of policy response,” he said. Among them, a raft of new regulators across Europe, the creation of the Systemic Risk Board and the European Financial Stability Fund.

Comforted by such reassurances and fortified with a last glass of the local Franciacorta sparkling wine (Italy’s fine riposte to France’s Champagne), guests returned home.

Before they were back at their desks, French banks were downgraded and UBS lost $2.3bn to a rogue trader.  

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