Measurement, Governance and Long-term Investing
Report

Measurement, Governance and Long-term Investing

The World Economic Forum
World Economic Forum, 2012
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7

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Recommendation

Societies and businesses benefit from long-term investors who take on difficult projects that entail substantial risk and uncertain outcomes. The World Economic Forum’s researchers and experts explain how metrics designed for short-term investing can trip up long-term investors and how the right governance can support a successful long-term investment program. The report examines the often-paradoxical nature of long-term investing, noting, for instance, that too much information frequently can obfuscate rather than clarify. The report is both descriptive and prescriptive; it concludes with some suggested best practices that long-term investors can adopt to improve their odds of success. getAbstract recommends this erudite paper to investors, policy makers, and students of finance and economic development interested in the long and the short of long-term investing.

Summary

In the Long Term

Long-term investing – “investing with the expectation of holding an asset for an indefinite period of time by an investor with the capability to do so” – can provide substantial value to businesses. Societies also can benefit from long-term investment since public infrastructure projects often require long investing horizons.

Private companies that try to invest in their businesses for the long haul often have to fight short-term pressures and expectations. For instance, when Apple launched the iPod in 2001, it sold substantially fewer devices than anticipated, and the company’s share price fell sharply. But Apple’s board of directors backed then-CEO Steve Jobs rather than second-guessing his strategy, and the rest is history: By the end of 2009, sales of the iPod topped 220 million.

Long-term institutional investors often fund projects that require large upfront capital injections and carry great risk with uncertain outcomes. These investors – sovereign wealth funds, insurance companies, pension funds, family offices, and endowments for universities, hospitals and charities – take a long view, follow varied investment approaches and frequently...

About the Author

The World Economic Forum is an independent international organization that works with business, political and academic leaders to debate industry issues.

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