Monday, February 4, 2013

The Joy of Stewardship Investing

As individuals, investing for our own account, we are free to pursue profit for profit's sake, each acting in our own (enlightened) self-interest.  In consequence, our portfolios are a collection of trading positions in various securitized assets, each of which we hope will increase in value over time, although we have personally no real ability to affect that outcome. For the more aggressive among us, we may trade positions more actively, working to extract profits from the markets (i.e. other investors) by buying at a discount to sell at a premium.  For each individual investment, we see only three points of value: asset, price, volume. Collectively, we see our portfolio in terms of a single point of value: it's net asset value.

For pensions, endowments and other institutions investing other people's money in furtherance of the purposes expressed in a governing charter of trust, the experience is different. These large, perpetual, resourceful stewardship investors can actually sponsor enterprises, in the process helping to drive the configuration and re-configuration of the economy as the network of exchanges adapts to the changing choices that people make through their participation in commercial transactions.

This makes investing by stewardship institutions a much richer and more rewarding exercise than it can ever be for any of us, acting alone and as individual investors.

It also creates both the need and the opportunity for stewardship investors to view their portfolios not just as a list of trading positions, but also in terms of their impact on the economy. For that, they need a map that represents visually the economy as a network of enterprises in which they are or could be investing.

What will that map look like?

Below is my first effort. If history is any guide, by the time we evolve a map we all agree is right, proper and properly useful for its intended purpose, this first effort will look quite crude.

But, there it is. We have to start somewhere.

Comments are welcome.

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