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Press Coverage
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This article was originally posted by Politico.
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CAPITAL MARKETS
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SCOOP — THINK TANK CALLS FOR SHAKE-UP OF INVESTMENT CHAIN: New Capital Consensus, the think tank chaired by City grandee Keith Skeoch, has published a report calling for a complete overhaul of the investment chain to get U.K. investment into productive assets.
Harsh words: In the new report, seen first by MFS U.K., the think tank criticized the U.K. investment industry, saying institutional asset owners nowadays “behave like traders rather than long-term investors” and are “driven towards highly liquid, low-volatility assets,” leading to an ineffective allocation of capital.
Not good enough: While some changes to the investment chain have been pursued, NCC complained that previous attempts at reforms had been “hampered by a lack of coherence and alignment in policy thinking,” such as the Mansion House Accord (which only targeted £50 billion in commitments), LTAFs (too complex), and Solvency UK (diluted by cautious definitions of eligible assets and bias toward “predictable” cash-flows).
Immediate calls: The think tank called on the government to set up a commission that would produce a report within a year on changes to industry risk and liquidity management required to improve the effectiveness of the U.K. investment system. NCC also said that policymakers should create an “Effectivity Screening process” across key points of the financial system, with asset allocators required to apply to screen to the development of their strategies.
Long-term: Beyond the immediate changes that can be made, the think tank argued the government needs a roadmap to support an increase in productive investment, that it should shift tax incentives from those that promote debt over equity, and that regulators be “rewired” from treating all investment risk as short-term.