Press release

Independent research launched on metrics and models for long-term investment

Business Secretary Vince Cable today launched research to highlight appropriate decision-making tools for long-term investors.

The research, prompted by a recommendation of the Kay Review of equity markets in 2012, will identify how investors currently analyse the performance of companies and investment portfolios, and assess the uses and limitations of different metrics and models for long-term investors.

Business Secretary Vince Cable said:

Professor Kay’s review recommended that investors should get a clear understanding of the long-term value of companies and returns for savers. This research will help them do just that.

Dr. Cable also announced the appointment of an expert steering panel from academia and the investment industry to oversee the award of the contract and the quality of the research. The members of the panel include:

  • Sarah Breeden – Head of Markets, Sectors and Interlinkages Division, Financial Stability, Bank of England
  • Professor Alexander Ljungqvist – Ira Rennert Chair of Finance and Entrepreneurship, Stern Business School, New York University
  • Anne Marden – Managing Director, J.P. Morgan Asset Management
  • Saker Nusseibeh – CEO and Head of Investment, Hermes Fund Managers
  • Anne Richards – Chief Investment Officer and Executive Director, Aberdeen Asset Management
  • John Thanassoulis – Lecturer, Department of Economics, University of Oxford

Notes to editors:

1.The invitation to tender can be viewed at https://www.gov.uk/government/publications/invitation-to-tender-research-into-metrics-and-models-to-assess-company-and-investment-performance. The government invites bids from parties interested in conducting research in one or both areas (identified as Parts A and B in the bid specification). The government encourages bidders to be innovative in their approach, considering how they might use a range of methods to best engage with relevant stakeholders and experts in order to obtain evidence and achieve the project’s objectives.

2.No payments will be made for participation on the panel.

3.None of the panel members undertake political activity.

4.In 2011, Vince Cable commissioned Professor John Kay to undertake an independent review to examine investment in UK equity markets and its impact on the long-term performance and governance of UK quoted companies. The final report of the Kay Review was published in July 2012, and the government published a formal response in November 2012. This can be viewed at: https://www.gov.uk/government/consultations/the-kay-review-of-uk-equity-markets-and-long-term-decision-making

5.The Kay Review concluded that short-termism is a problem in UK equity markets, and that the principal causes are the decline of trust and the misalignment of incentives throughout the equity investment chain.

6.Recommendation 13 of the Report was that: ‘The government and relevant regulators should commission an independent review of metrics and models employed in the investment chain to highlight their uses and limitations.’

7.One of these principles was that: ‘Metrics and models used in the equity investment chain should give information directly relevant to the creation of long-term value in companies and good risk adjusted long-term returns to savers.’

8.In response to the Kay Report, the government has acknowledged the importance of promoting a greater understanding of the uses and limitations of different metrics and models in the context of long-term investment approaches, but concluded that commissioning expert research externally was most likely to achieve this objective.

9.The research project will be part funded by the Policy Contestability Match Fund that was first announced in the Civil Service Reform Plan last year.

Expert Steering Panel – Biographies:

Sarah Breeden – Head of Markets, Sectors & Interlinkages Division, Financial Stability, Bank of England

Sarah Breeden has worked in a wide variety of roles at the Bank of England since joining from university twenty years ago. She was recently appointed Head of Markets, Sectors & Interlinkages Division (MSID) in the Financial Stability (FS) area. MSID assesses and identifies ways to reduce the risks to the UK financial system that arise in financial markets, in the real and non-bank financial sectors and in the linkages between these areas.

Prior to joining FS, Sarah led the Bank’s work to support the transition of prudential regulation of banks and insurers from the Financial Services Authority to a new subsidiary of the Bank, the Prudential Regulatory Authority. And before that, she was head of the Bank’s Risk Management Division and head of Special Projects in the Markets directorate, involved in designing and risk managing many of the financial market operations undertaken by the Bank, including those introduced during the financial crisis – advancing the Asset Purchase Facility, that supports the Monetary Policy Committees ability to undertake quantitative easing and the Special Liquidity Scheme, and the Discount Window Facility designed to provide liquidity insurance to banks.

Professor Alexander Ljungqvist – Ira Rennert Chair of Finance and Entrepreneurship, Stern School of Business, New York University

Professor Alexander Ljungqvist holds the Ira Rennert Chair of Finance and Entrepreneurship at New York University’s Stern School of Business. He also serves as Editor of the Review of Financial Studies, Research Associate of the National Bureau of Economic Research in Cambridge, Research Fellow of the Centre for Economic Policy Research in London, Senior Academic Fellow of the Asian Bureau of Financial and Economic Research in Singapore, and Fellow of the Research Institute of Industrial Economics in Stockholm.

His research interests include investment banking, IPOs, entrepreneurial finance, private equity, venture capital, corporate governance, behavioural corporate finance, and asset pricing. He has published articles in these areas in all leading scholarly journals, including the Journal of Political Economy, the Journal of Finance, the Review of Financial Studies, and the Journal of Financial Economics. In 2011, he was honoured with the Kauffman Prize Medal. The recipient of several teaching awards, Dr. Ljungqvist teaches an MBA class in new venture financing, a PhD seminar in corporate finance, and executive courses in venture capital, private equity, and investment banking. He has previously taught at Harvard Business School, Oxford University, Cambridge University, and London Business School. Currently, Dr. Ljungqvist serves on the Nasdaq Listing Council and on the World Economic Forum’s Council of Experts on Alternative Investments.

Anne Marden – Managing Director, JP Morgan Asset Management

Anne Marden joined J.P. Morgan Asset Management in 1986. Her core area of expertise is fundamental equity research where she is a long standing member of J.P. Morgan’s buy side analyst team. She covers the European Healthcare sector, and is also co-portfolio manager for a Global Healthcare fund. Anne was top ranked buyside analyst in the Pharmaceuticals sector in the 2012 Thomson Reuters Extel Pan European survey. Her work as an equity analyst also touches on Corporate Governance where she is an active member of the Proxy Committee. She is also a CFA charterholder and a non-executive director on the Board of CFA UK – the UK Society for Chartered Financial Analysts.

Anne is a US citizen and grew up in New England where as a child she enjoyed skiing and mountain climbing. She studied at Princeton (Economics ’81) and INSEAD (MBA’85). She rowed on the USA national team from 1978-1992.

Saker Nusseibeh – CEO and Head of Investment, Hermes Fund Managers

Saker Nusseibeh is CEO and Head of Investment at Hermes Fund Managers. He is responsible for leading the business through the next stage of its growth and ensuring that Hermes delivers on its core values of excellence, responsibility and innovation.

Previously, he was CIO Global Equities and Global Head of Equities at Fortis Investments and CIO Global Equities at SGAM UK. Prior to this he was CIO Global Equities at TCW. He started his career at Mercury Asset Management in 1987.

Saker is the Chairman of the 300 Club, a group of leading investment professionals from across the globe who seek to raise awareness about the potential impact of current market thinking and behaviours, and to call for immediate action. Saker is also a public member of Network Rail.

Anne Richards – Chief Investment Officer and Executive Director, Aberdeen Asset Management

Anne Richards is Chief Investment Officer and Executive Director of Aberdeen Asset Management, a FTSE 100 company. She began her career as a research fellow at CERN, the European Organisation for Nuclear Research, moving into investments in 1992. Her career has included research analysis, portfolio management and global asset allocation.

A graduate of University of Edinburgh and INSEAD, Anne is a Chartered Engineer and a Chartered Fellow of the Chartered Institute for Securities and Investment. She is a FN100 Women in Finance and a member of the Board of Leaders of 2020 Women on Boards. Anne also holds various non executive positions.

John Thanassoulis – Lecturer, Department of Economics, University of Oxford

John Thanassoulis currently lectures in the Department of Economics, Oxford University, and is Official Student (Fellow) of Economics at Christ Church. From September 2013 John will be the Professor of Financial Economics at Warwick University Business School. John is a member of the UK Competition Commission Academic Panel, Treasurer of the Blackfriars Overseas Aid Trust (charity number 288585), and was a Non-Executive Director of Oxford Investment Partners (OXIP) until its successful acquisition. John was educated at both Oxford and Cambridge, studying Mathematics followed by Economics.

John is an economic theorist specialising in the scientific analysis of strategic decision making. He applies these tools to the fields of Executive Pay, Finance and Financial Stability, and Industrial Organization. His current major research projects include the link between bankers’ pay and financial stability; impact of short-term shareholders on corporate performance; the case for forced deferral of executive bonuses; and credit constraints and firm performance. John explains current economic issues on radio and TV.

10.The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set four ambitions in the ‘Plan for Growth’ (PDF 1.7MB), published at Budget 2011:

  • to create the most competitive tax system in the G20
  • to make the UK the best place in Europe to start, finance and grow a business
  • to encourage investment and exports as a route to a more balanced economy
  • to create a more educated workforce that is the most flexible in Europe.

Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.

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