Driving thoughts: capital movements

In light of the recent events, I’ve decided to tune in to Bourgeois FM to hear commentaries of what’s been happening. Out of coincidence, I listened in this morning to a segment regarding regional market movements and heard the thoughts of a fund manager about what investors are doing in lieu of global developments.

Obviously big words are thrown around about yields and strategies and how money managers are staying on the sideline, weathering the known unknown of market uncertainties. “Investors are ‘risk off’, waiting for things to blow by…” were the words said, in effect. This meant that fund managers on the whole would rather just sit on their pile of cash, than ‘invest’ it, out of fear that bad things could happen and their money would be lost.

The foreign fund manager’s thoughts had little to do with current developments here in Malaysia, and neither will my preceding thoughts. It just got me thinking. Investors, money managers, traders, or whatever, from my experience would talk about how much money they’re moving around, how much value they’re adding to the economy and how what they’re doing is so important, relative to people on the street. To them, they are the movers and shakers of the economy, “allocating” capital to where it is needed most.

To a certain extent, yes, I agree, there is some value to what they do. For everyday people (and probably, not even that many people), these money managers ensure that our retirement savings grow and is not lost to inflation, allowing us to barely retire comfortably when we’re older. But in many other cases, how much of that money that they manage goes into ‘real’ investing. For a lot of asset managers, these funds are allocated into paper instruments, shares, bonds, short term money market, in order to realise certain returns at the end of a period. Given the short term nature of their goals, how much of the capital they invest is poured into longer term, productive assets?

It just got me thinking, asides from moving cash quickly from one place to another for quick returns for only a handful of investors – and yes, only a handful of people are invested in anything – what real value do they add to the economy?

Anyway, this is just a passing thought on a morning drive to school. Maybe I’ll do more work on it.

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