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Inside investment: Money management's existential crisis

Professional investment managers and their clients may have given themselves an impossible goal of generating superior short-term returns.

They said it couldn’t be done

Is the money management industry – or ought it to be – facing an existential crisis?

An investment strategist at one of the big European banks was asked not long ago on one of the financial wallpaper channels if professional investors had learnt the lessons of 2008-09. "No," he replied, "they will never be able to learn such lessons because they are chasing returns over a six-month to 12-month period and returns cannot be predicted over such short time horizons."

My first reaction was to reflect that this is the kind of pessimistic thinking that made Europe what it is today, for better or worse. But, then, scepticism and pessimism have a long and honourable tradition there. One need only mention the name of Arthur Schopenhauer, who maintained that in life pain always predominates over pleasure. Schopenhauer’s disciple, Eduard von Hartmann, took this genial idea even further by positing that Schopenhauer was too optimistic.

According to von Hartmann, all is pain. What we perceive as pleasure is in reality a lesser degree of pain, which only serves to make the rest of the pain more intense by contrast. Suicide was therefore the only logical choice.

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