Rothschild chief says pension funds should take big stakes for long-term, sustainable value

Pension funds should take large, proprietary ownership stakes in companies in order to drive more long-term, sustainable ‘outsized’ value rather than rely on asset managers “who are mostly just aiming for normal returns”, according to Lynn Forester de Rothschild, Chief Executive of E.L. Rothschild, the investment holding company. Rothschild said pension fund beneficiaries had been “screwed” for too long by asset managers that were neither delivering much value nor social benefit. She was speaking at the FT/IFC Transformational Business in London (June 12). She said more pension funds should emulate peers such as the Canada Pension Plan Insurance Board (CPPIB), the CA$220bn fund, which is known – as are a number of big Canadian pension funds – for its large portfolio of long-term, private market investments. Forester de Rothschild said institutional investors and consumers had significant roles to play in enabling businesses to be long term and to serve a “broader purpose” that was both profitable and socially useful. For investors, she said, it was vital to eschew quarterly reporting but demand broader corporate reports over time that looked at areas like human capital and innovation, the alignment of the company structure and remuneration to the longer-term, and issues likehuman rights in supply chains: “I believe attention to these issues can both reinvigorate trust in capitalism and be profitable. If investors lead the way then the public will take note and finance will be seen as part of a social solution, not a problem as it is at the moment. The question is how long investors can go on focusing on short-term value rather than investing in long-term businesses?”
Forester de Rothschild co-runs the E.L. Rothschild group with her husband, Sir Evelyn Robert de Rothschild, a member of the Rothschild family. The company manages a portfolio of investments, including a stake in The Economist Group, owner of The Economist magazine, and real estate, agricultural and food businesses. The couple also back a number of for-profit, non-profit and governmental organisations aimed at promoting prosperous and equitable communities. Forester de Rothschild has recently taken a high profile stance on sustainable capitalism and the role of investors. Last month, she backed a major Inclusive Capitalism conference in London with speakers including Bill Clinton and Christine Lagarde.