Hermes sees institutional investors driven by ‘short-termism’

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Hermes Investment Management says in its inaugural Responsible Capitalism Survey that increasing numbers of institutional investors feel driven to adopt short-term views on investments because of factors such as modern portfolio theory, accounting standards such as FRS 17, and a triennial cycle of valuations.

Encompassing the views of 108 European institutional investors, the survey includes findings such as:

  • 61% of institutional respondents believe that large shareholders are likely to ‘become unaware’ of the companies they invest in, forgoing voting rights and thereby losing influence
  • 32% of institutional investors believe pension funds should look at the overall quality of life experienced by their beneficiaries, rather than maximising retirement incomes for their member
  • 37% of institutional investors believe pension schemes focus on investment performance to the extent that they disconnect from their responsibilities as owners of actual companies
  • 44% of institutional investors believe quarterly results should cease in favour of more long-view reporting

Saker Nusseibeh, chief executive, Hermes Investment Management, said: “I am stunned that less than one third of investors believe that pension funds should look at the overall quality of life experienced by their beneficiaries, rather than maximising retirement incomes for their members. Surely everyone saving for their retirement is doing so with the goal of the best quality of life they can hope for in retirement. A staggering 49% of investors disagreed with this, 17 percentage points more than those who agreed.”

Click here for the research finding infographics.

 

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