Investing for the long run

Long-horizon investors have an edge. They can ride out short-term fluctuations in risk premiums, profit from periods of elevated risk aversions and short-term mispricing, and they can pursue illiquid investment opportunities. The turmoil we have seen in the capital markets over the last decade has increased the competitive advantage of a long investment horizon.Unfortunately, the two biggest mistakes of long-horizon investors—procyclical investments and misalignments between asset owners and managers—negate the long-horizon advantage. Long-horizon investors should harvest many sources of factor risk premiums, beactively contrarian, and align all stakeholders so that long-horizon strategies can be successfully implemented. Illiquid assets can, but do not necessarily, play a role for longhorizon investors, but investors should demand high premiums to compensate for bearingilliquidity risk and agency issues.

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.


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