Findings include a significant gap between the investment objectives of savers, investors, and corporations

Boston, MA, 7 December, 2020 — FCLTGlobal, a non-profit organization that develops research and tools that encourage long-term business and investing, today launched FCLTCompass, a new annual dashboard designed to trace savings, investments, and corporate spending to measure long-term behavior in global capital markets.

FCLTCompass gauges investment behavior in terms of both money and time, counting dollars that savers around the world put into various asset classes and measuring the total timeframe of those investments. The dashboard also tracks the scale and timeframe of corporate funding sources relative to how companies allocate those resources.

The project’s main conclusion is that a significant gap exists between the amount of time savers intend to hold an investment and the actual duration of the investments themselves. The data shows a difference of more than eight years between the expected investment horizon of the everyday saver and the true time frame that their capital remains committed to a particular investment. Likewise, corporations have access to capital with short-term time horizons that are misaligned with their own longer-term objectives.

“The way in which capital flows from savers, to investors, to the companies that use it can be an opaque process. FCLTCompass is the first tool to measure the flow of money from the saver to the end-user of the capital” said Sarah Keohane Williamson, FCLTGlobal’s CEO. “What the data tells us is that while savers and companies are far-sighted, the connection between them – the capital markets – have a short-term time horizon, making it difficult to achieve long-term goals.”

FCLTCompass data shows other significant emerging trends in the global investment community, notably:

  • A widespread shift to indexed equity is contributing to an overall increase in average holding periods, while the low-rate environment has inspired yield-chasing behavior for fixed income.
  • The evolution of companies toward fixed asset–light business models naturally contributes to declining investment time horizons by changing the composition and average useful life of assets in a company’s portfolio.
  • Chinese savers’ wealth more than tripled from 2009 to 2018. This increase in wealth coupled with an investor preference for cash and real estate in the region could significantly impact global household investment horizons.

The project marks a new phase for FCLTGlobal, which since 2016 has published practical research to help market participants make longer-term financial decisions. FCLTCompass provides a new proof point to the organization’s work – the first edition of the flagship project analyzes data from 2009-2018 and will be updated annually. By relying on data reported prior to 2020 and the global pandemic, this evaluation serves as a baseline to gauge the impacts of this period on global investment behavior.

“While FCLTGlobal has made tremendous advances through research and advocacy to encourage the adoption of a long-term focus, change requires the efforts of all actors in the investment value chain,” said Mark Machin, Chair of FCLTGlobal’s board of directors and President and CEO of CPP Investments. “This report makes an even more compelling case for the adoption of long-termism as the norm.”

FCLTGlobal’s member companies actively participated in in the research process, and provided real-world insight from global market leaders. CPP Investments, EY, GIC Private Limited, Kempen Capital Management, MSCI Inc., and Nasdaq contributed directly to this project and were instrumental in both the concept and development.

“FCLTCompass is an important tool that outlines capital flows across the investment value chain and reveals the extent to which capital is focused on long-term goals. Identifying these patterns and gaps will help investors strengthen mechanisms and behaviors to better serve their stakeholders, and contribute to sustainable growth,” said Lim Chow Kiat, CEO of GIC and a member of FCLTGlobal’s board of directors. “GIC is one of the earliest members of FCLTGlobal as we share a common commitment to achieving long-term tangible actions that benefit businesses, markets and societies more broadly, and we are delighted to contribute to this significant project.”

CoreData Research Services Inc. provided the data for the entirety of the project. FCLTCompass’ interactive dashboard, as well as the project’s inaugural report, is available at Webinars to showcase the first findings of the work are scheduled for 10 December 2020 in various time zones.

View the FCLTCompass interactive dashboard here, and download the full report here.