Chains of Finance

Abstract

Investment is no longer a matter of individual savers directly choosing which shares or bonds to buy. Rather, most of their money flows through a ‘chain’: an often extended sequence of intermediaries. What goes on in that chain is of huge importance: the world’s investment managers, who are now almost as well paid as top bankers, control assets equivalent in value to around a year of total global economic output. In Chains of Finance, five social scientists (four of whom have worked in investment management) discuss the ways in which the intermediaries in the chain influence each other, channel the flows of savers’ money, enhance investment decisions, and form audiences for each other’s performances of financially competent selves. The central argument of the book is that investment management is fashioned profoundly by the opportunities and constraints this chain creates. Whether chains constrain or enable, however, they always entangle, tying intermediaries to each other—silently and profoundly shaping the investment management industry. Chains of Finance is a novel analysis that will make students, social scientists, financial professionals and regulators look at the workings of financial markets in a new light. A must-read for anyone looking for insights into the decision-making processes of investment managers and those influenced by and working for them.

Modelos de financiarización de las pensiones en cuatro estados de bienestar europeos

“…The result is a large network of financial intermediaries, that stand between the plan members and the financial markets in which their savings are invested. Such intermediation comes at a cost, as each actor within the network charges fees for their services (Arjaliès et al 2017). Here, developments in the welfare state connect to the broader process of financialization, which involves the growing share of profits for the financial sector in the economy (Krippner 2005).…”

This can(’t) be an asset class: The world of money management, “society”, and the contested morality of farmland investments

“…Yet even though the asset management industry has grown tremendously in size over the past two decades, its internal operations, and the social and material glue that holds these together, still remain rather opaque (Dörry, 2016). Indeed, as late as 2014, at a time when the world’s pension funds, insurance companies, mutual funds, and their various intermediaries such as private equity funds managed 97$trillion, more than the world’s GDP (Arjaliès et al., 2017: 1), the Governor of the Bank of England puzzlingly acknowledged that “analysing and managing the behaviour of asset managers is […] a greenfield site” (Haldane, 2014: 14). More theoretically grounded interventions have mobilized the notion of assetization to make sense of contemporary operations of finance (Birch and Tyfield, 2013; Muniesa et al., 2017), including farmland investments (Ducastel and Anseeuw, 2017; Ouma, 2018; Sippel, 2018).…”

“…This led to new forms of contractual relationships in the money management industry as many investment managers outcontracted vital services such as asset management, investment advice or data provision, and at times have even been legally obliged to do so (e.g. in the case of investment advice, see Arjaliès et al., 2017). This is the reason why most of the investments in financial markets today, including markets for farmland, occur through extended “network[s] of delegation” (Muniesa et al., 2017: 133).…”

“…(Sherrick, cited in Agriinvestor, 2015: 30)How do I compare or calculate the gross returns of 12, 13, 15, 16, 19, 24 percent in different countries of Africa, or Latin America or Russia with a comparable risk-adjusted or even zero-risk return in a country such as New Zealand? (Interview, 2014, asset manager, 3)Consultants, as important – but in debates on “financialization” often unnoticed – sources of investment advice (Arjaliès et al., 2017; Clark and Monk, 2017), have also been slow to pick up on the rising farmland trend:When you ask investors or consultants, they all agree that we need more intellectual permeation, but how that should exactly happen is another question, because the consultants themselves have no clue. (interview asset manager 3, 2014)At the level of the asset itself, the most significant entry barrier for institutional capital has been the peculiar nature of farmland.…”

Central banking and financial political power: An investigation into the European Central Bank

“…A key challenge lies in specifying the precise interests of any given actor within central bank policy debates. In this regard, it is important to acknowledge the increasing heterogeneity of the industry and a financial landscape populated by actors entangled within networks of interdependence and specialized activity (Arjaliès et al., 2017). To develop a nuanced and fine-grained picture of financial political power, then, researchers must pay attention to variables such as the market conditions in which different firms thrive, competing preferences on financial regulation, and the differential impact of macroeconomic policies.…”