Behaving Like an Owner: Plugging Investment Chain Leakages

December 2, 2013 Leave a comment

Behaving Like an Owner: Plugging Investment Chain Leakages

Jane Ambachtsheer Mercer Investments

Richard Fuller Mercer Investments

Divyesh Hindocha Mercer Investments

September 24, 2013
Rotman International Journal of Pension Management, Vol. 6, No. 2, 2013

Abstract: 
The theme of investing for the long term through engaged ownership is gaining profile. This article explores the implications of “behaving like an owner” and estimates its financial benefits. We follow the journey of $100 over 20 years under four different “leakage” scenarios. Downstream leakages are active management fees, manager transition costs, and excessive trading; upstream leakages are unwarranted M&A activity and misaligned incentive structures. We find that fixing these leakages can increase the size of savings pots by as much as 25% over a 20-year accumulation period. We also address the behavioral question, “If this is so self-evident, then why do presumably rational investors keep doing these irrational things?” We close with some thoughts on the behavioral changes needed to get institutional investors behaving as owners.

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Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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