FCLTCompass tracks long-term investment behavior on a global scale. Our latest analysis, covering calendar year 2022, shows short-term decision-making at both ends of the investment value chain. Investment horizons for companies and savers decreased to the lowest in the history of our study.
2022 marked a year of turbulence – with households, institutional investors, and corporations all trying to adapt to a new macroeconomic environment. Higher inflation and interest rates led to declines in the equity and fixed-income markets, as well as a decline in global wealth overall. Both the corporate and saver groups reached new lows in time horizons since we began tracking FCLTCompass data in 2009.
In 2022:
In 2022, public companies continued to prioritize capital distribution over reinvestment, with total payout to developed market shareholders reaching 90 percent of net income, compared to just 74 percent in 2021. This over-distribution of capital undermines resilience and impedes long-term value creation.
Household savers experienced a nine percent decrease in overall wealth, coupled with a five percent shortening in their investment horizon. A down year in global equities and fixed income decreased long-term savings, and additional cash reserves for rainy-day scenarios further shortened household horizons. These horizons continue to shorten in stark contrast with their retirement needs; this is demonstrated in the enormous retirement gap many individuals currently face.
Despite challenging macroeconomic headwinds, institutional investors have again lengthened their investment horizons, overtaking corporates in 2022. By continuing their shift from active public equity into indexed public equity and private equity, developed market institutional investors have lengthened their horizons while trading off liquidity.
Meanwhile, the investment horizons of household savers in emerging markets are reaching levels similar to their developed market counterparts through the establishment of large saving institutions with long-term oriented investments. The fastest growing saver institutions over the past decade were not any US pension, OCIO, or endowment: instead, it was large, state-backed funds like China Investment Corporation and the Abu Dhabi Investment Authority. The growing impact of official long-term savings institutions at scale in emerging markets has lengthened the investment horizons in these regions considerably.
These shifts have significant implications for all capital market participants. What can companies, investors, and savers learn from these trends to improve their long-term decision-making?
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Report
5 December 2022 - FCLTCompass is an annual benchmarking tool tracking long-term investment behavior on a global scale. The results of the latest analysis suggest that investment horizons receded in 2021 due to global disruptions such as inflation and COVID-19 recovery efforts.
Report
6 December 2021 - FCLTCompass tracks long-term investments on a global scale. The project anchors long-term investing to quantitative data reported in years and dollars, framing the conversation around sustainable finance in a more actionable light.
Report
7 December 2020 - FCLTCompass is an annual reporting of money as it flows through the global investment value chain. Taking 10+ years of financial data, it traces investors’ savings through various asset vehicles, finally arriving at the companies that deploy it in support of economic growth.