Unlocking Beneficial Capital by Improving Investor Transparency
Authors: Ashby Monk, Dane Rook, and Rajiv Sharma
Beneficial investment organizations (BIOs)—such as public pension funds, endowments, and the investment arms of charitable organizations—are a cornerstone of American welfare and the foundation of our modern capitalist system. American BIOs manage tens of trillions of dollars in pursuit of their goals, and this financial capital serves to power the American economy. But hundreds of billions of dollars are wasted by BIOs every year due to insufficient portfolio transparency, which contributes to BIOs paying excessive fees, assuming unnecessary and uncompensated risks, and chronically underperforming. Insufficient BIO transparency thus harms not only their direct beneficiaries (e.g., retirees, universities and charities), but it also harms America. Due to this opacity, billions of investment dollars are artificially diverted away from long-term projects that could have widespread social and economic benefits. In short, poor transparency on portfolio attributes, such as costs and sustainability, prevents beneficial investment organizations from actually benefiting their stakeholders and America.
Increasing BIO transparency through enhanced reporting and disclosure could unlock hundreds of billions of dollars in beneficial capital for long-term projects that would aid large segments of American society. Improved transparency would allow stakeholders to better understand BIOs’ investment decisions and their long-term consequences, which could then underpin design changes (e.g., better governance and regulatory structures). Transparency is thus a catalyst to make BIOs more willing to change and improve how they invest, which will unlock capital for long-term, large-scale projects that America desperately needs and drive high risk-adjusted returns. Launching a Presidential Advisory Commission is the best first step for the Biden-Harris Administration to take to improve transparency among BIOs and unlock substantial volumes of long-term beneficial capital.
About the Authors
Ashby Monk is the Executive and Research Director of the Stanford Global Project Center, and was named by CIO Magazine as one of the most influential academics on institutional investing. He is also a member of the Future of Finance Council at the CFA Institute. Monk is also the co-founder of Long Game Savings. He holds a Doctorate in Economic Geography from Oxford University, a Master’s in International Economics from the Universite de Paris I - Pantheon Sorbonne and a Bachelor's in Economics from Princeton University.
Dane Rook is a Research Engineer at Stanford University’s School of Engineering, where he explores the intersection of machine intelligence and long-term investing. He was previously a researcher at Kensho, a successful AI-startup, and J.P. Morgan. Dr. Rook earned his doctoral degree from the University of Oxford as a Clarendon Scholar. He also holds degrees from the University of Cambridge and the University of Michigan. Dr. Rook is an advisor to technology startups in both the U.S. and Europe.
Rajiv Sharma is a Research Director at the Stanford University Global Projects Center. His current research is on the design and governance of innovative institutional investment models, vehicles and access points for long-horizon projects. He is the author of Reframing Finance: New Models of Long-Term Investment Management, and has consulted with numerous institutional investors around the world, in the USA, Australia, India and the Middle East on the analysis, design and strategy of investment operations. He has been an advisor to the U.S. Department of the Treasury Office of Technical Assistance Government Debt and Infrastructure Finance team, and worked as a consultant economist to the OECD, World Bank and UN DESA. He completed his doctorate from the University of Oxford and Bachelor of Engineering/Commerce conjoint degree with first class honors from the University of Auckland.