Boston, MA – FCLTGlobal released today the newest findings of FCLTCompass, an annual project tracking 10+ years of financial data to study key trends in capital markets behavior. The data, spanning from 2009 to 2020, shows that corporate investment patterns grew longer-term during the COVID-19 pandemic while investor trends became shorter-term within the same timeframe.

The gap between the investment time horizons between companies and investors is widening because of the pandemic, the study finds. When faced with the shutdown of the global economy in early 2020, many companies opted to focus on longer-term initiatives despite debt and public equity holding periods that fell by over 10% in the same period. By the end of 2020, the gap between the average time horizons of corporate sources of capital and corporate uses of capital stood at over 2 years.

Key findings of the new report include:

• In 2020, corporate investment horizons lengthened by 8.1 percent globally, driven by curtailed distribution of capital to shareholders and increased investment in the business via R&D and growth of fixed-asset investment.
• The investment horizons of investors shortened by 2.3 percent on average in the same timeframe, driving investors’ intention-allocation gap – the difference between an investors’ objectives and its actual allocations – up to seven years, four months.
• Household wealth grew by 9.1 percent from 2019 to 2020, but the growth in savings was not evenly distributed and skewed toward wealthier households.
• On a regional level, 12 of the 17 national economies tracked in the study grew shorter-term in 2020.

“The theme of FCLTCompass 2021 is divergence – and in particular the contrast between companies and their investors in response to COVID-19. We’re seeing that, in the face of volatility, companies are committing to the long term, while investors appear headed in the opposite direction. The data will be critical to closing that gap over time,” said Sarah Keohane Williamson, FCLTGlobal’s Chief Executive Officer.

FCLTCompass was first published in 2020 to track investment behavior in terms of both money and time. The project counts the dollars that savers around the world put into various asset classes, measures the total timeframe of those investments, and tracks the scale and timeframe of corporate funding sources relative to how companies allocate those resources.

FCLTCompass data shows other significant emerging trends, notably:

• Investment in R&D jumped to levels not seen in the past two decades – 10.9 percent of total spending. R&D spending was broadly spent across several sectors, not just driven by the healthcare and pharmaceutical industries racing to develop COVID-19 vaccines.
• Investment in fixed assets climbed to 29 percent of total spending in 2020, as companies brought their supply chains in-house and enhanced mission-critical infrastructure. The pandemic response appears to have led many companies to reconsider their supply chains and reinvest in domestic production.
• Shorter investment horizons in fixed income and public equities varied greatly from the reaction of household savers, who favored cash and equities or pulled money from the markets and prioritized more tangible real estate investments.

“Companies and their investors are hungry for data to help evaluate whether decisions are smart for the long term. Are decisions helping to drive long-term success? Are we meeting the investment goals for our organization? FCLTCompass is a tool that can help to answer these questions, and better tools will help companies and investors direct funds toward long-term growth,” said Theresa Whitmarsh, Executive Director of the Washington State Investment Board and chair of FCLTGlobal’s Board of Directors.

“Knowing why companies and investors should be long-term is one half of the issue – knowing if they’re actually moving in that direction is the other. By using real-world data over a decade-plus, FCLTCompass shows to what extent we are truly becoming longer-term – or not. This information is vital in bringing companies and investors closer together on how they allocate capital and invest for the long-term,” said Tim Koller, Partner at McKinsey & Company.

FCLTCompass is made possible by the data collection, methodology, and analysis provided by CoreData Research Services Inc. and the International Forum of Sovereign Wealth Funds (IFSWF), and by all of FCLTGlobal’s member organizations that contributed their insights and expertise to the project.

The FCLTCompass 2021 dashboard and report are now available at www.fcltglobal.org.

To learn more about the project and its findings, join FCLTGlobal on 9 December for a virtual launch event, The Economics of Resilience: Capital Allocation and Investment Horizons During COVID-19. The discussion will be moderated by Ariel Babcock (FCLTGlobal’s Head of Research) with a panel of experts including:

• Juhi Dewan, Senior Managing Director, Wellington
• Bricklin Dwyer, Chief Economist and Head of Economics Institute, Mastercard
• Prakash Kannan, Managing Director and Chief Economist, GIC

### 

Media Contact

Ross Parker, [email protected], +1 508 667 5451