Alternative Investment Management Association Representing the global hedge fund industry
21 March 2014
Capital markets are significant drivers of economic growth and increasing their size could compensate for the post-financial crisis decline in bank lending, according to new research by two leading academics commissioned by AIMA, the global hedge fund industry association. The conclusions of the research could have relevance for Singapore, according to AIMA Singapore.
There is a clear link between deeper capital markets and long-term real growth rates in GDP, according to original research outlined in a new paper* by Christoph Kaserer, Professor of Finance, Chair of Financial Management and Capital Markets, TUM School of Management, Munich, and Marc Steffen Rapp, Professor of Finance, Accounting & Finance Group, School of Business and Economics, Philipps-Universität Marburg, Germany.
Capital markets support economic growth by providing new sources of funding for long-term investment and facilitating improvements in corporate governance, the paper says. It says activities by pension funds, non-bank lenders and active investors such as hedge funds grow the real economy. Capital markets comprise stock and bond markets and capital markets activity includes both debt and equity financing.
The paper also reveals the extent to which economies traditionally regarded as bank-based have embraced capital markets in recent years.
Han Ming Ho, AIMA Singapore Chairman, said: “We welcome the publication of this paper, which finds a strong correlation between growth in debt and equity markets and growth in the ‘real economy’. It suggests there could be considerable economic benefits to Singapore from growing Singapore’s capital markets, stimulating demand for pension funds and other investment products that benefit greatly from deeper capital markets, and promoting the growth of Singapore as a regional financial services hub.
“Although the paper takes as an example the economies of the European Union, it shows how governments globally can benefit from a well-developed capital markets policy. This is especially true for countries in Asia where banks are still the primary source of capital and where capital markets play a more peripheral role.”
Jack Inglis, AIMA CEO, said: “This is an important and timely paper which underlines the strong role that capital markets and their participants play in driving economic growth and prosperity. It stresses the positive role that hedge funds and asset managers in general can play, using their expertise and willingness to create positive governance changes in the firms in which they invest. Hedge funds are important providers of liquidity, risk management and price discovery in capital markets.
“Bank lending clearly is not keeping pace with demand and the global economic recovery could be jeopardised unless new sources of financing can be found, particularly from the investment management community. We would therefore encourage governments globally to implement policies that help to protect and grow capital markets.”
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Note to editors
*‘Capital Markets and Economic Growth – Long-Term Trends and Policy Challenges’, by Christoph Kaserer and Marc Steffen Rapp. To download a copy, click here: www.aima.org/download.cfm/docid/5D6152C4-C9A0-4FDA-B2DD415168ED658B
To download an AIMA position paper on the research, click here: www.aima.org/download.cfm/docid/7E7766E3-A0FA-4C21-A471A21E879EEA9D
For media enquiries, please contact Christen Thomson, AIMA’s Head of External Affairs. Tel: +44 (0)20 7822 8380; Email: email@example.com
As the global hedge fund association, the Alternative Investment Management Association (AIMA) has over 1,400 corporate members (with over 7,000 individual contacts) worldwide, based in over 50 countries.
Members include hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms, investors, fund administrators and independent fund directors. They all benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals and its excellent reputation with regulators worldwide.
AIMA is a dynamic organisation that reflects its members’ interests and provides them with a vibrant global network. AIMA is committed to developing industry skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the industry’s first and only specialised educational standard for alternative investment specialists. For further information, please visit AIMA’s website, www.aima.org.