An Industry in Shake-Out Mode

This post was written by Juan Adorno ’20. Connect with him on LinkedIn.

All I’m saying is simply this: that all life is interrelated, that somehow we’re caught in an inescapable network of mutuality tied in a single garment of destiny.” — Martin Luther King Jr.

From Carhart’s landmark 1997 study on mutual funds that found evidence of lack of skills across fund managers[1], to the 2008 Global Great Recession that rattled people’s pockets around the globe, driving historical levels of mistrust in institutions, (particularly government and financial services!), add on the clear signs of the times of the retail investments business: extreme pricing pressures, oversupply, commoditization, and overall industry consolidation, and what we have is — an industry at a crossroads, an industry in shake-out mode! The Active Retail Investments Business is at a turning point! I’d be remiss not to fully disclose that the recent Franklin Templeton acquisition of Legg Mason Asset Management sparked my motivation to free flow some industry thoughts, provided I spent most of the past decade bringing myself up in the business from inside those walls.

In describing the signs of the times, future business history textbooks will reference Larry Fink’s letter to CEOs, A Fundamental Reshaping of Finance [2], as a demarcation point toward a twisty-turny long-winded path toward Sustainable Capitalism. The letter promotes the ideas of long-term value creation and sense of purpose: climate risk as investment risk; the importance of transparency and accountability; and, improved disclosures for shareholders. That “awareness is rapidly changing, and […] we are on the edge of a fundamental reshaping of finance.”[2]

Ubiquitous in nature, in the same way that sustainable investing has emerged as a major trend in the investments space, renewable energies will continue to increase their share of the energy mix [4] as electric vehicles will increasingly make their way on roads [5], and healthier foods will increasingly take share of dinner plates[6]—all interconnected developments that are a part of a wave of consciousness: A Great Awakening. Albeit nature works slowly, demographics, globalization and technology have seemingly spurred an emphatic spark in humanity [3].

“Sustainability,” (in the broadest sense of the word) is a thread that binds the retail investments business with the whole of humanity: a truth best channeled as unlocked blue ocean opportunities for long-term, multi-dimensional value creation. An idea to stimulate the inherent social purpose for corporations. Like concepts such as money and capitalism, it all starts with an idea, like that which says that we are inextricably interconnected to each other and this one planet we all call home. In this spirit, and in tribute to Black History Month, I’ll conclude with words from Martin Luther King Jr.: Commencement address to Oberlin College in June 1965

“All I’m saying is simply this: that all life is interrelated, that somehow we’re caught in an inescapable network of mutuality tied in a single garment of destiny. Whatever affects one directly affects all indirectly. For some strange reason, I can never be what I ought to be until you are what you ought to be. You can never be what you ought to be until I am what I ought to be.T his is the interrelated structure of reality.”

Works Cited

[1] Carhart, Mark. On Persistance in Mutual Fund Performance. (1997)

[2] Fink, Larry. A Fundamental Reshaping of Finance. (2020)

[3] Rifkin, Jeremy. The Emphatic Civilization. (2010)

[4] Nyquist, Scott; Manyika, James. Renewable Energy: Evolution, not revolution. (2016)

[5] DiChristopher Tom. Electric Vehicles will grow from 3M to 125M by 2030, International Energy Agency Forecasts. (2018)

[6] Renner, Barb; Ringquist, Jack. Capitalizing on the shifting consumer value equation. (2015)