Institutional managers worried about GFC fall-out

A group of 10 major institutional investment houses has formed a new body aimed at addressing what they believe is "increasing regulatory disruption and a drive towards costly and complex financial models".

The new group, the 300 Club, is based on the premise that current financial and investment theory and practice runs the risk of failing investors at their time of greatest need.

300 Club chairman and Hermes Fund Managers executive Saker Nusseibah said the objective was to make sure that what was being built by the professional investment community was "the optimal answer for the investor or for society".

Nusseibah cited three main trends which had contributed to the growing impact of the financial industry on the economies of most developed countries and which had culminated in the global financial crisis.

He said these were increased complexity of instruments and models creating the feeling of a 'free lunch', an increased focus on products as opposed to investor trends, and relatively benign markets during the bulk of the last 50 years which encouraged a view that markets would always rise.

Nusseibah said a consequence already visible in investment markets was a herding of investors into increasingly over-priced assets while continuing to count on de-correlated return to lower risk.

"Coupled with this, the shift under regulatory pressure, of investor interest away from 'risk capital' is a major body blow for western economies that desperately need investment capital to help regenerate their competitiveness and foster growth," he said.