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Future of capital markets

Building a Framework for 21st Century Capital Markets

By June 15, 2015No Comments

This spring, HMI is partnering with the Journal of Applied Corporate Finance to launch a major research project on the future of capital markets and the role for business leadership in capital market reform. Our goal is to identify the changes are now required if we are to build a sustainable governance and management model for capital markets that can ensure the vitality and independence of the asset management industry while serving the long-term interests of both investors and society.

We have chosen to focus on the role of business leadership in capital market reform for three reasons:

1. Importance of the sector – Efficient and effective capital markets pooling savings and allocating them to productive investments are the fulcrum for economic growth. Without effective and sustainable capital markets, we cannot expect to address the development challenges of a global economy and society.

2. Influence on others – Capital markets have enormous influence and systemic impact on the broader economy, and the actions of leading financial institutions have a critical role to play in helping us move to a social contract in which business can take greater responsibility.

3. The need for action – Coming out of the great recession, the financial sector and capital markets face a series of significant challenges that open a window for change. These include regulatory, trust, governance, management and behavioral issues that are increasingly undermining market efficiency and effectiveness and are working against the interests of the industry, investors and society.

Some may point to the rise of socially responsible and impact investing as signs the industry is changing. While fast growing, the socially responsible investment sector remains a small fraction of the industry with little impact on the behavior of markets as a whole.

In this context, our research objective is to assess the broader systemic challenges facing capital markets and identify potential market-driven leverage points that could help move the mainstream markets to a more sustainable operating model.

Question we are asking include:
• What is the current context for capital markets?
• What are the key internal and external drivers shaping the future of the markets?
• What are the key challenges and opportunities these drivers raise in terms of creating a framework for sustainable capital markets?
• Who are the key influencers within the mainstream markets and what is their view of these issues?
• Where can changes within existing operating systems in capital markets leverage broad systemic impact?
• Are there opportunities to improve the dialogue between management and shareholders to encourage a longer-term investment perspective?

Further information on our research project can be found here and we welcome your input and thoughts on these questions.