The fifth annual Milken Institute Asia Summit, held from 12-14 September in Singapore, gathered global leaders to address the trends, innovations, and disruptions transforming the Asia-Pacific region, and provided actionable steps to effectively prepare for the inevitable transition. The Milken Institute hosts annual events that bring together the top minds from every industry and sector to find collaborative solutions to common problems. FCLTGlobal and many of our Member companies were fortunate enough to take part in the annual Asian gathering, including in an off-the-record roundtable on employing a longer-term focus in business and investment decision-making.
The roundtable – “Changing Perspectives on Long-Term Investments” – hosted by FCLTGlobal CEO Sarah Williamson and GIC CEO (and FCLTGlobal Board Member) Chow Kiat Lim, convened leading asset owners and investors to candidly share their views on the engagement between corporations and investors, risks to long-term capital allocation, stakeholder management, as well as how to develop practical tools to encourage long-termism in their organizations.
Lim kicked off the session by stating that being long-term as an organization came down to ‘value’ and ‘values’. At the heart of adopting a long-term approach is value creation – not just for the companies involved, but for the wider community at large. At the same time, while companies are working towards producing superior results in the long term, they would need to have “reasonable” results in the short term. They would have to demonstrate that they have good processes, sound governance and an alignment of incentives. These are “values” issues which would help to guide organizations in their decision-making and avoid short-term measures. An effective way to focus on the long term, would be to instill that focus across an organization’s entire ecosystem.
Williamson then familiarized the group with FCLTGlobal, a not-for-profit dedicated to developing practical tools and approaches that encourage long-term investment behaviors, and outlined the goals of the day: to hear directly from asset owners on the ways in which they manage their portfolios for the long term in the face of short-term pressure, and on practical ways to achieve that goal moving forward. The pair were then joined by a host of experts who shared their views on how goals with longer horizons can be achieved, despite a need to perform in the nearer term.
Highlighting recent research into the tensions between the long and short term in Chinese companies, Suyi Kim (Head of Asia Pacific, Canada Pension Plan Investment Board) shared examples of how CPPIB has directly encouraged a more long-term corporate focus in Chinese business. CPPIB, together with Hillhouse Capital and Caixin Insight Group, recently conducted a survey on the topic – findings suggest that the majority of Chinese companies have a long-term focus, though this mindset can be impacted by various performance pressures.
Every organization has different objectives and demands, and all can realize their long-term goals through various strategies. The group then shared their organization’s experiences in successfully satisfying short-term demands, while maintaining a trajectory for long-term success:
Temasek International Pte. Ltd. discussed how Temasek has actively engaged with its investor community in order to build understanding and support for its long-term oriented decision-making.
APG Asset Management shared thoughts on how the use of artificial intelligence (AI) can address its constituents’ immediate needs and long-term aspirations simultaneously.
OMERS has found that investing in infrastructure can generate both long-term returns and near-term cash flows that its savers desire.
As we have seen via market trends and heard from industry observers, the growing divide between public and private markets has raised questions over the viability of public companies’ long-term plans and the role of the shareholder in driving an organization’s mission. Steffen Meister (Executive Chairman, Partners Group) looked at the implications of the ongoing shift to longer-term ownership of leading businesses in private markets, recalling Partners Group’s own transformation toward a focus on value creation.
The group reconvened for a Q&A session, debating practical questions around the uncertainties, risks, and opportunities of long-term investments and how to address them. Specifically, the group discussed:
What mechanisms boards can use to encourage long-term thinking
How to balance taking on long-term risks and being mindful of short-term demands of stakeholders
How to structure managers’ and staff incentives in a way that creates alignment towards long-term goals
Chow Kiat Lim wrapped up the session by reiterating that at the end of the day, the investment community should seek to see the pie “get bigger”, not “bigger slices of the same pie”, and for the system to continue to create long-term value.
The day in Singapore was one full of discourse, debate, and eye-opening insight into how today’s leading asset owners find harmony between larger objectives and the more immediate needs of their beneficiaries. The Milken Institute provided us, our Members and partners, with the opportunity to come together and share practical approaches to solve today’s most common issues in investment. We thank everyone who organized and participated in the event for their enthusiasm and commitment to our collective goal of a more widespread orientation of capital towards the long term.