New Report from PIC: The Purpose of Asset Management

The principle aim of the Purpose of Finance project, launched by the Pension Insurance Corporation (PIC) in Spring 2017 with the publication of “The Purpose of Finance”, is to help facilitate a long-term discussion about the development of a new, common sense perspective from which to evaluate the performance of the financial industry. PIC is working with David Pitt-Watson and Dr Hari Mann to facilitate debate on the financial sector in general, as well as its constituent parts.

The latest report from the project on “The Purpose of Asset Management” is authored by academic practitioners Dr Jim Hawley and Jon Lukomnik. From the press release: “The authors believe that the industry does not adequately fulfill its purpose and that this problem is primarily caused by over reliance on a theory of investing which has failed to evolve enough since the 1950s to meet current challenges. This contributes to, and perpetuates, misalignments of interest with the industry’s customers by focusing internally on capital markets and not enough on systemic issues.”

From the report: “Hawley and Lukomnik suggest a number of incremental fixes, such as a simple fee statement equivalent to the nutrition statements which appear on prepared foods, and a “do-no- harm” Hippocratic Oath for the industry. The key recommendation, however, goes to the heart of how we invest. They suggest that taking systems issues into account, even while retaining MPT for portfolio level analysis would improve the returns for all participants: individual investors, institutional investors, and even the industry itself.”


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