New Developments in Long-Term Asset Management

Supported by the Norwegian Finance Initiative
Monika Piazzesi and Luis Viceira, Organizers
First Annual Conference
Cambridge, Massachusetts

May 19-20, 2016

Conference Papers

Incentive Fees and Competition in Pension Funds,
Assaf Hamdani, Eugene Kandel,
Yevgeny Mugerman and Yishay Yafeh

Asset Manager Funds,
Joseph Gerakos, Juhani Linnainmaa, and
Adair Morse

An Equilibrium Model of Institutional Demand
and Asset Prices
Ralph S.J. Koijen and Motohiro Yogo

The Effect of Passive Investors on Activism,
Ian Appel, Todd Gormley, and Donald Keim

Family Descent as a Signal of Managerial Quality,
Oleg Chuprinin and Denis Sosyura

Volatility Managed Portfolios,
Alan Moreira and Tyler Muir

Risk and Return in Segmented Markets
with Expertise
Andrea Eisfeldt, Hanno Lustig, and Lei Zhang

Securities Lending as Wholesale Funding,
Nathan Foley-Fisher, Borghan Narajabad, and
Stephane Verani

Liquidity Transformation in Asset Management,
Sergey Chernenko and Adi Sunderam

< 2017 Conference Papers>
< 2018 Conference Papers>

Over the last three decades, long-term investors such as sovereign wealth funds, public and private pension plans, universities, and endowments associated with other non-profit entities have become increasingly important in global capital markets. These mission-driven organizations play a significant role in the well-being of current and future generations. They also have longer investment horizons than many other capital market participants.

Textbook models of optimal intertemporal portfolio choice suggest that optimal asset allocation can be both horizon-dependent and time-varying. Long-horizon investors, unlike their short-horizon counterparts, value hedges against future deterioration of their investment opportunities, and may invest accordingly. The measurement of risk, the importance of liquidity and the return penalty an investor is prepared to incur in order to preserve it, and the portfolio shares assigned to many broad asset classes may differ between long- and short-horizon investors.

Events of the last decade have raised a host of new challenges for long-term investors. Falling returns on long-term safe assets, such as inflation-indexed U.S. Treasury bonds, have made it more difficult to achieve long-term return targets without taking on additional risk. The correlations between the returns on various asset classes have also shifted, thereby raising questions about the assessment of risk over long horizons.

To investigate the theory and practice of long-term investing, and the implications of the standard theory of optimal asset allocation for long-horizon investors, the NBER, with the support of the Norwegian Finance Initiative, has launched a three-conference series. The first meeting was held in Cambridge, Massachusetts, on May 19-20, 2016, and examined a range of issues that affect the opportunity set or in other ways inform the behavior of long-term investors.

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