The Case for Engaged Capital (Full Report)
In the early part of 2020, the international monetary system is under stress. Persistent low interest rates threaten macroeconomic and financial stability and are contributing to rising inequality. Raising the rate of investment in productive assets is essential to address these problems and to increase economic growth rates globally. Raising investment rates is also needed to address the social problems that threaten political stability in some of the world’s poorest countries.
If we are to raise the rate of investment in productive assets, we must change the relationship between financial investors and the company managers who are responsible for productive investment decisions. The majority of financial investment is either in the form of passive funds which track indices and take a hands-off approach to company management, or transactional capital deployed by traders who are focused on technical factors rather than the fundamentals that create long-term value.
To address this problem, we need a radical change in financial investor mentality. More engaged capital is needed. Engaged capital is the key to ensuring that company managers have the space needed to make sound decisions to add to productive assets in the pursuit of long-term value.