This report has explored some of the key trends affecting investors in the post-global financial crisis era to which regulators, policymakers and corporates must respond. While much of the analysis has focused on issues facing UK and Irish investors, many of the themes will resonate far more widely.
Recent years have seen significant change in the investor landscape. The traditional domination of markets by pension funds and insurance companies has been eroded both by greater international ownership of companies, and by the emergence of other players such as hedge funds and private equity firms.
This changing composition has led to a significant shortening of investment horizons. The computerised trades that take place in microseconds have also raised questions about the identity of the owners of companies and how corporates can address this ownership vacuum’. We have already seen international policymakers, such as the G20 and EU, responding with measures to enhance long-term shareholding.
Related to this, quarterly reporting is a source of much controversy. While there is a constant demand by investors for more information and transparency, the existence of quarterly reporting is also regarded as contributing to the sense of short-termism in market activity.
Central bank activism, leading to loose monetary policy, historically low interest rates and currency wars throughout Europe and the US, has been a major response by the authorities to the global financial crisis. This has had a clear effect on investors, making them search for yields in riskier investments.
There may also be more regulation as a response to the crisis, and a focus on asset managers could be next. There are challenges here for corporate governance, regulation, accounting and other areas.