Panel, Fireside Chat
Framework for Investing for the Long Term
- Long-termism is positioned to counter short-term cultural and economic dynamics, with specific expectations for sustainable development goals to represent a $30 trillion global opportunity and a $12 trillion opportunity within four sub-sectors over the next 15 years, potentially generating 400 million new jobs.
- Investment horizons vary by strategy, with Wellington Management targeting five-plus year holdings and a compensation structure weighted 50% on five-year and 25% on three-year performance, while private equity is viewed as medium-term (5–7 years) versus true long-term investing (approx. 20 years), and certain assets are held for four to six years to capture structural benefits.
- Market outperformance and structural shifts are anticipated, including a 480 basis point advantage for private equity over public markets over 10 years, a rapid business landscape turnover where top five companies change every 25 years, and a surge in deal flow for media control and emerging markets like Myanmar where clients are doubling annually.
- Regulatory and governance frameworks face challenges, with current pension evaluation systems and incentives described as ill-suited for long-term measurement, only 5% of the audience identified as the future-defining millennial generation, and the US permitting process cited as the primary hurdle to infrastructure development despite expected administrative leadership.
- Financing strategies are evolving through de-risked vehicle structures, with commercial banks reducing long-term project appetite post-Basel III, while insurance companies and national development banks are stepping in to offer 12-year senior debt and backstop projects, with plans to sell these instruments to domestic and international pension investors.
- Sector-specific outlooks emphasize deep research and governance, with healthcare investments based on 2025 medical predictions and portfolio turnover rates of 20% to 35% (lower for biopharma), while African infrastructure is noted for a 1% default rate compared to 9% in North America, and companies addressing societal challenges are expected to exhibit higher growth and scalability.
- Capital deployment opportunities are identified in idle funds, particularly in Japan, intended to meet US and global infrastructure needs, alongside expectations for digital finance and SME growth, though the industry remains in early phases regarding empirical standards for impact measurement.
- Illiquidity is expected to remain a necessary control mechanism for public fixed income over 10 to 30-year spectrums to manage industry evolution, facilitated by negotiable covenants, while talent, growth, and scale are identified as the critical drivers for creating lasting value and alpha.