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Fiduciary Finance

Investment Funds and the Crisis in Financial Markets Martin Gold, Sydney Business School, University of Wollongong, Australia
This multi-faceted analysis of institutional investment defines ‘fiduciary finance’ institutions as the third pillar of the financial system, alongside banks and insurers. It documents the role played by investment funds and the money management industry during the recent financial crisis, and provides an unashamedly critical review of the business disciplines which can dominate investment practices. It clarifies the economic significance of the investment industry (circa $60 trillion in assets) and the features which differentiate fiduciary finance from traditional financial
institutions such as banks and insurers.
Extent: 208 pp
Hardback Price: $120.00 Web: $108.00
Publication Date: 2011
ISBN: 978 1 84844 895 7
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This multi-faceted analysis of institutional investment defines ‘fiduciary
finance’ institutions as the third pillar of the financial system, alongside
banks and insurers. It documents the role played by investment funds
and the money management industry during the recent financial crisis,
and provides an unashamedly critical review of the business disciplines
which can dominate investment practices. It clarifies the economic
significance of the investment industry (circa $60 trillion in assets) and
the features which differentiate fiduciary finance from traditional financial
institutions such as banks and insurers.

Martin Gold reviews the intellectual foundations of the investment
discipline and synthesizes the literature into the principal ‘scientific
paradigms’. He explores the legal frameworks (prudential investment
standards) that govern mainstream portfolio management practices
which, combined with the commercial imperatives of the investment
industry, can create marked differences from textbook depictions of
investment management. Recent events have again called into question
the worth of the now ubiquitous collective investments such as pension
funds and mutual funds, and the integrity of the financial markets. Given
the trillions of government funds which have been committed to financial
bailouts, and the volatility experienced by investors, the author asserts
that a critical analysis of fiduciary finance must question whether better
outcomes can be achieved. Tellingly, most fiduciary finance institutions
remain outside the perimeter of macro-prudential regulations.

This challenging and multidisciplinary work promises to provide a
fascinating read for academics focusing on economics and finance,
money and banking, as well as for investment and financial services
practitioners, policymakers and market regulators.
Contents: Preface Part I: Institutional Investment and the Industrial Organization of Fiduciary Finance 1. An Introduction to Fiduciary Finance 2. The Investment Business 3. Investment in its Institutional Setting Part II: The Intellectual Underpinnings of Institutional Investment 4. The Science of Investment 5. The Active versus Passive Debate Part III: Fiduciary Finance and the Stability of Financial Markets 6. The Gatekeepers of Fiduciary Finance 7. The Rise of Sovereign Wealth Funds 8. Sustainable Investment Strategies and Fiduciary Activism 9. Future Financial Crises: What Role for Investment Funds? Appendix: A Mathematical Analysis of Fund Manager Performance References Index