Gore urges pensions funds to consider longer-term investments
In a speech before the National Association of Pensions Funds in Edinburgh on Wednesday, former US Vice President Al Gore told the pension industry that if they do not look to longer-term investment goals, they risk harm to efforts to build sustainable economies. He said that most mutual funds now turn over completely within a year, while the average time for holding such funds a generation ago was eleven years. Part of the problem, he said is that fund managers are rewarded on a quarterly basis.
As another indication of how business seems only to plan for the short term presently, Gore told his audience about a poll of chief executives in the United States, which asked them if they would invest in a project that did not enhance quarterly earnings. The majority answered that they would not. The problem with that, Mr. Gore said, is that investments that put companies in a more sustainable position were inherently long-term and should not be held to quarterly or even annual targets. Instead, he said, that a system based on a three-year compensation cycle would lead to more consideration of long-term goals.
Mr. Gore, who recently participated in the Oscar-winning documentary “An Inconvenient Truth”, is chairman of Generation Investment Management, a London-based company that looks to encourage long-term investments. He co-founded the company in 2004 with several former Goldman Sachs (NYSE: GS) partners.
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