Chapter 10. 2012 and After

The interests of beneficiaries are largely interests in long-term absolute performance. The concern of asset managers—and the basis on which they are monitored by many asset holders and by advisers to asset holders and retail investors—is short-term relative performance. This misalignment of incentives creates many problems.

—John Kay, in The Kay Review of Equity Markets and Long-Term Decision Making1

Europe’s crisis removes any possible belief that the disaster of 2007–09 has cured the world’s financial problems. They remain acute and must still be addressed even if, as is quite possible, the world navigates the next few years without a second major collapse in the prices of stocks, real estate, or other assets. For ...

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