Finding Friends Is Hard: Long-Term Investors’ Relationship With Proxy Advisors, Activists, and Long-Term Private Equity Funds

July 31, 2019

Institutional investors are howling for US public companies to focus more on the long-term.

This is unsurprising. Long-term focused companies produce significantly better results over time, reporting far greater revenue growth with less volatility, far higher levels of economic profit, and greater total return to shareholders. So if you are holding stock for a long time, a long-term focus for your portfolio companies is critical.

And as every new dollar flows from actively managed funds to passive strategies, reducing the ability of funds to trade nimbly in and out of stocks, long-term stewardship naturally emerges as a more important focus for the large fund complexes.  Indeed, more institutional investors are recognizing that the scale of their actively-managed funds makes them less able to move fully in and out of their positions, creating funds that are “behaviorally long-term”, and, consequently, more profitably focused on the long-term growth of their portfolio companies than on trading strategies.

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This article was republished by The Columbia Law School Blue Sky Blog.