The role of investors in promoting sustainable long-term growth

In response to the 2008 financial crisis, the immediate reactions of policy makers were appropriately focused on mitigating risk. Considering further improvements to the financial ecosystem, it will be important to expand the focus in a way that supports and sustains long-term economic growth within the parameters of a post-crisis regulatory framework. Today, asset owners are playing a growing role in supporting growth and this means that we need a better understanding of the different types of asset owners, their investment objectives and their constraints. This paper seeks to describe the role of various asset owners in the real economy and highlights the impacts of post-crisis monetary policies and financial regulatory reforms. In many cases, these policies have altered the asset allocation behaviour of asset owners, at times, in conflict with other policy objectives. This paper sets out the merits of market finance as a tool to support growth and a complement to bank finance. It also explains how reforms to market structure could improve investor confidence to encourage greater investment. Finally, the paper discusses market finance initiatives in Europe that could have a beneficial impact on the European economy.