Obviously the world has changed. It is unstable, instantaneous and profoundly interrelated. On the financial markets, the result is fluctuations that are ever sharper and more rapid. This environment increases the nervousness of investment managers, who often chase short-term performance to meet their clients’ expectations. In doing so, they buy and sell on rumour, a practice that accentuates volatility. The one feeds off the other, creating a vicious circle.
In this context, the Caisse has decided to focus on the fundamental aspect of its mandate: the long term. It manages the assets of 29 pension and insurance funds, which by definition have long-term obligations. It must meet their needs while contributing to economic development. The concept of sustainability is critical to its mission. It is therefore necessary – and relevant – to measure its investment horizon in terms of years – three, five, 10 or even more – rather than on a quarterly or semi-annual basis.
Intrinsic value rather than financial smoke and mirrors
• companies that offer useful services or manufacture everyday objects;
• infrastructure that facilitates economic activity; and
• buildings where people live, work or shop.
For such investments to be profitable they must be based on stringent criteria and strong convictions. Research is therefore of vital importance – economic and financial research, of course, but also multidisciplinary research based on operational and industry expertise. The objective is to select well-conceived projects and well-managed businesses, not necessarily those that are part of an index but those that are the best positioned. That is why the Caisse has begun adding specialists from various fields to its team – engineers, geologists, telecom and transport experts, and so on –, to further enhance its expertise.
Solid partners: a necessary complement to internal expertise
This strategy has already proved itself splendidly in Brazil, where a partnership with Ancar, a real estate company, has enabled a Caisse subsidiary to become a major player in the local shopping centre industry. To ensure success and foster mutual understanding, partners with common interests need to be identified.
An approach with several advantages
But the advantages are also undeniable. Companies gain solid financial partners they can rely on over the long term. Regions gain investors that sustain their economy with developmental projects. And investors with a long-term view, like the Caisse, also stand to gain because they obtain access to major transactions and they can take the time to allow acquired assets to reach their full value. It’s a winning strategy for all stakeholders.
Also visit www.oecd.org/economy/
©OECD Observer No 295, Q2 2013
Is the long view the answer to today’s epidemic of “instantaneous”?
|If any word sums up today’s world, it’s definitely “instantaneous.” News spreads at the speed of light. Content is interpreted in mere seconds. Forecasts proliferate at a frenzied pace. But all this has a drawback: volatility increases. In such a context, it’s vital to take a step back. And it soon becomes clear, maintains the Caisse de dépôt et placement du Québec, that a long-term view is more relevant than ever.|
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