The Ledger
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Williamson: Long-term behavior from US firms would have added $1T, 5M jobs
“In the United States over the decade leading up to 20 16, if the short-term companies in this country, and I know this is a big if the short-term companies in this country had been able to behave like the long-term countries, They would have created a trillion…”
Williamson: Boards mathematically cannot optimize for both short and long-term investors
“And so that is where the problem is, that there is, is mathematically impossible to optimize for both a high discount rate, shorter term investor, and a lower discount rate, longer term investor.”
Williamson: Sovereign wealth CIOs value illiquidity to prevent committees from panic-selling
“There was a CIO of a big sovereign fund I know well who, during the crisis, was forced by his oversight committee to sell his public equities because people got scared, but couldn't sell his private equities, and told me later, he said, I don't need an illiqui…”
Williamson: Investors can have an analytical edge but not an information edge
“It's just much, much harder to have an information edge. You can have an analytical edge, but not an information edge.”
Williamson: Long-term companies outperform generally but suffer steeper crisis drawdowns
“If you look at how long-term companies have behaved, long-term companies on a number of financial metrics, versus how short-term companies have behaved, what you see is that long-term companies outperform in terms of revenue, profitability, share appreciation,…”
Williamson: Quarterly guidance does not reduce volatility or boost valuation
“A lot of people believe it lowers volatility of the stock. That's not true. Or increases valuation, the credibility premium, yet that doesn't exist.”
Williamson: Endowments prioritize total return over benchmark constraints compared to pensions
“What I found is that, as you know, they're very different investors than pension plans. They're not pension plans. They tend to be much longer term. They tend to be more interested in Total return than other issues like fitting things in boxes and some things …”
Williamson: Big investors profit from corporate value growth over alpha extraction
“Increasingly, particularly big investors recognize that the money that they're going to make is not necessarily by harvesting alpha and beating the other guy. It's by having economic value of those companies actually grow and generate revenues and innovation a…”
Williamson: Intermediation in capital markets degrades long-term investing into short-termism
“Typically what happens is that money goes from a saver to a big asset owner, like a pension plan or an endowment or a sovereign wealth fund, to an asset manager through the publicly traded capital markets into a publicly listed company. In that process, that l…”
Williamson: Long-term firms invest counter-cyclically while short-term firms retrench
“Typically long-term companies are more counter-cyclical, and short-term companies are more pro-cyclical. Markets go, get bad, they lay everybody off, they retrench. Whereas a long-term company will then go and try to pick up customers and employees and so on.”
Williamson: Wellington placed managers on regulatory watchlists for unexplained outperformance
“So one of the things we did at Wellington years ago, I was responsible for overseeing a number of portfolios that the OCC also was responsible for looking at. And they always, of course, wanted us to put things on the watch list if they had underperformed. And…”
Williamson: Benchmarks should serve as communication devices, not rigid constraints
“The thing with a benchmark is it's a communication tool, and there are times when managers don't perform or go way off of where they're supposed to be, way out of their mandate, and so there has to be a communication device, and the benchmark is that. Now, tha…”
Williamson: Escrowed performance fees work better than clawbacks due to loss aversion
“There's a lot of behavioral work that says that something that is escrowed is longer term than something that's a clawback. We have this loss aversion, right? So sometimes people have these fees and there's a clawback if you then underperform. Doesn't really w…”
Williamson: Starting investor reports with quarterly returns trains LPs to think short-term
“Sometimes investors, Complain that their LPs are very short-term, or their clients are very short-term, but then you read their investment letter, and it starts with, dear investor, this quarter we returned 7.2% versus a, well, of course they're short-term. Yo…”
Williamson: Managers fear portfolio transparency when allocators invest directly
“One of the challenges for many investment managers these days is that a lot of their clients are both investing through managers and investing on their own account. And so investment managers rationally sometimes can be Scared of showing their positions to, Yo…”
Williamson: Traditional qualitative manager-executive meetings will not drive future asset management
“Many of us were brought up with the idea that the way you manage money Is you start with a blank piece of paper, and you sit down and talk to somebody who runs a company, and you decide whether they seem to have a good strategy and know what they're doing or n…”
Williamson: Capital exists for savers' dignity, not the finance industry
“So my biggest investment pet peeve is people who take advantage of investors who are not sophisticated. So I think that they forget that the reason for the money is not to fund our industry or to trade or to whatever, but that the reason for the money is to pr…”
Williamson: Only 27.5% of US public companies issue quarterly earnings guidance
“The first is, it's not a phenomenon in most countries. It's a U.S. Phenomenon, but even in this country, it's down to about 27 and a half percent of companies actually issue quarterly guidance, so it's a minority practice.”
Williamson: Average realized duration of US CEO compensation is just 1.5 years
“The longer compensation leads to longer term behavior, but that the average duration of CEO compensation, realized duration in this country is about a year and a half.”
Williamson: Amazon board documents explicitly define duty to long-term share owners
“Amazon's board, Amazon is often quoted as a very long-term company, actually explicitly has in their corporate governance documents that their responsibility is to what they call the long-term share owner, and so they don't get themselves into this who's our d…”