What They Do With Your Money (Stephen Davis; Jon Lukomnik; David Pitt-Watson, 2016)

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Review: This book provides a sense of why you should explore investment options than putting money in the bank as they practically does the same thing with fees. Rated: 8/10


  • Finance provides 4 vital services:
    • Safe custody: wealth storage
    • Payments system
    • Intermediation between lenders and borrowers: adequate cash
    • Reducing risk: venture funds are widely spreaded
  • If managing a fund too small, eventually the fund will depreciate due to fee management
  • Institutional investors improvement strategies
    • Looking in the mirror: self performance assessment
    • 2-way communication: more transparent for investors
    • DIY fiduciary duty: improved regulation
    • Pay for performance
    • Benchmarks: with national bodies
  • Regulation should make markets work better
    • Problems with atomized approached in regulation
    • Assumes every part of a system is well designed, a chain is as strong as its weakest link
    • Models for future measurement are not accurate
    • Only regulate at entity level
    • Too much responsibility on regulators
    • Need quicker definition therefore less effective
  • Critical disciplines for regulation
    • The fiduciary fix: agents to be directly involved
    • Well-designed institution
      • Responsibility
      • Accountability
      • Relevant
      • Vigilant and oversight
    • Behavioural economics
  • Gauss and modeling risk
  • People’s pension plan
    • Accountable and knowledgeable governing board
    • Report on costs, benefits, stewardship efforts and decision-making practices
    • Enable communication among beneficiaries
    • Easy to enroll
    • Large enough to diversify risks
  • Troubleshooting financial system:
    • Start by being clear about the purpose of the system, understand what “good” looks like
    • Restore accountability to asset management
    • Promote a culture of ownership in investment
    • Apply good governance to investing institution
    • Reset regulations based on purpose
    • Reboot financial institution


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