• University of New South Wales
  • Macquarie University
  • The University of Sydney
  • University of Technology Sydney
  • Australian National University
  • The University of Melbourne
  • Capital Markets
  • Sirca
  • Commonwealth Bank
  • KPMG
  • King & Wood Mallesons
  • Macquarie
  • Australian Government - Treasury
  • New South Wales Goverment

CIFR Research Project

Investing for the Long Run - T003
Assessment Round: November 2013  Completion Date: 2014
Project Summary

Much has been written about the so-called problem of short-termism in financial markets.  David Gonski AC, a past chairman of the Future Fund and current Chancellor of UNSW Australia, is among those who have criticised a focus on the short term, commenting that “we in Australia suffer in all sectors from a short-term perspective”. This project contributes to this debate by examining long-term investing from the perspective of institutional investors.


Dr Warren presenting at CIFR Seminar: Long-term Investing in Melbourne, October 2014

This project aims to:
•    Provide insight into the nature of long-term investing, and the type of payoffs.
•    Provide guidance into the kind of organizational and market structures that might encourage long-term investing.


Paper 1, Long-Term Investing: What determines Investment Horizon? , introduces and lays the foundation for the research, covering what determines investment horizon. Several definitions of what constitutes long-term investing have been put forward. But, as the paper notes, none fully captures all the relevant dimensions.

The paper argues that long-term investors are marked by two characteristics: they have discretion over when they trade; and they approach investing with their sights set on the long term. The paper also identifies a range of influences on the horizon adopted by investors, including an organisation’s structural and operational policies, combined with its particular funding and liability profile.

Paper 2, Benefits (and Pitfalls) of Long-Term Investing, identifies three broad advantages that long-term investors have over their more short-term focused counterparts. These areas of advantage point towards a total of eight specific strategies.

The first broad advantage relates to the removal of time pressure from the investment decision allowing them to pursue investments that may be avoided by those with shorter horizons.

The second advantage of long-term investing relates to the ability to exploit opportunities arising from the actions of short-term investors. These could include mispricings that arise from their activities, or premiums associated with risks to which short-term investors are averse.

The third advantage is that long-term investors typically have latitude to use a wider range of investments. In particular, they are more able to invest in unlisted and illiquid assets, which are typically not within the domain of short-term investors. Notwithstanding its advantages, there are several pitfalls associated with long-term investing. Arguably, the biggest danger relates to incorrect expectations about what the long term holds.

Paper 3, Designing an Investment Organisation for Long-Term Investing, identifies four building blocks for constructing an investment organisation with a long-term horizon:

•    Organisational orientation – The guiding principles, governance and decision-making structures, and culture of an organisation must necessarily be aligned to reflect a focus on long-term investing.

•    Incentive structure – Performance evaluation and associated rewards should be consistent with long-term outcomes. Ideally, bonuses should be awarded for making progress towards long-term objectives, and then paid over time only if performance is sustained. Emphasis on short-term relative performance should be avoided.

•    Investment approach – No prescriptive recommendations are offered; but a long-term investment approach should focus on the drivers of long-term outperformance, while filtering out short-term influences.

•    Trading discretion – Fund managers whose trading activity is not dictated by short-term funding and liquidity considerations typically have greater latitude to invest for the longer term.

Paper 3 also describes how the Future Fund interprets and works towards its long-term objectives.


This research has been presented at:           This research also contributed academic articles to:

Macquarie Applied Finance Centre Seminar
Sydney (July 2014)

Q Group Conference
Sydney (September 2014)
CIFR SEMINAR: Long-Term Investing: An Institutional Investor Perspective
Melbourne (October 2014)
This  research will also be presented in i3 Conferences in Sydney and Singapore in 2015.


Team Leader:
Dr Geoff Warren | CIFR Research Fellow, Senior Lecturer, Finance, Actuarial Studies & Applied Statistics, Business and Economics, Australian National University
Mr Stephen Gilmore | Head of Strategy, Australian Government Future Fund
Mr Will Hetherton | Head of Public Affairs, Australian Government Future Fund
Dr Nigel Wilkin-Smith | Strategist, Australian Government Future Fund
Project Outputs:


The Centre for International Finance and Regulation (CIFR) represents a strategic link between academia, financial regulators, policy makers and industry, promoting financial sector vibrancy, resiliency and integrity, through leading research and education.

CIFR receives funding and support from the Commonwealth and NSW Governments, and its industry, university and research centre partners.



2011 Centre for International Finance and Regulation | Level 7, 1 O'Connell St, Sydney 2000 | Ph: +612 9931 9342 | Email info@cifr.edu.au | ABN 57 195 873 179

Privacy statements | Copyright and Disclaimer

Site by HarvestThe.Net