Future of Finance Conference Convenes Thought Leaders at Yale SOM

Thought leaders from industry and academia came together at the Yale School of Management on September 9 and 10 for the Future of Finance Conference, which explored the opportunities and challenges in using financial systems to address today’s major social problems.

Nobel Laureate Robert Shiller

Speakers at the conference, presented by Yale SOM’s International Center for Finance, included leading academic theorists, such as Nobel Laureate Robert Shiller, the Sterling Professor of Economics at Yale, and Andrew Lo YC ’80, the Charles E. and Susan T. Harris Professor and the director of the Laboratory for Financial Engineering at the MIT Sloan School of Management. A diverse group of finance industry leaders included Paolo Zannoni GRD ’76, a partner and managing director at Goldman Sachs; Ranji Nagaswami ’86, a senior advisor at Corsair Capital; and Lingfeng Li GRD ’99, a portfolio manager at Capula Investment Management.

The conference began with a keynote address by Wilbur Ross, chairman of WL Ross & Company. Ross discussed disruptive technologies’ effects on the banking system and the continuing regulatory challenges the system faces in the wake of the financial crisis.

Ross described mobile banking as a great advance that offers customers “one-stop shopping,” but noted that cyber security threats are a growing concern: “Anything transmitted wirelessly is subject to interception,” he said.

“The current trend is toward biometric authentication such as fingerprints, facial recognition, retina recognition, voice recognition, and, believe it or not, even heartbeat recognition. There also will be more sophisticated and complex methods of encryption plus predictive analytics to identify behavioral abnormalities in the net, possibly preempting cyber attacks.”

I believe that finance is a powerful tool for promoting the good society, if it’s done right.

Ranji Nagaswami ’86

In his talk, Shiller drew on concepts from the fields of behavioral finance, sociology, economics, and psychology, asserting that finance—when undertaken properly—can benefit all of society.

“I believe that finance is a powerful tool for promoting the good society, if it’s done right,” Shiller said.

He discussed the many and complex factors that motivate people, arguing that effective financial policies must take all of these into account: “We need constant innovation that recognizes people are complex, social animals.”

Panel sessions included discussions on the issues facing markets today, on global trends in finance, on multi-generational asset management, and on innovation in financial instruments.

Speaking on the markets panel, Eli Combs ’01, president of MeehanCombs, predicted increased volatility in the markets.

“We think there are going to be lots of challenges arising from the combination of the rise in democratization of strategies—to sell more assets to more people—and significantly decreased liquidity in markets,” he said.

On the global panel, Eddie Tam ’93, CEO and CIO of the Hong Kong-based Central Asset Investments, commented on the turmoil in China, suggesting that authorities had overreacted to the drop in the stock market.

“China has a very short history in capital markets. The government has never tied itself so closely, in terms of its own prestige and face, to the fortunes of the markets… The question that everybody is asking is, why is the government so keen on intervening so early, and in a manner that is so violent and so vast?”

The asset management panel explored the unique challenges that managers of foundations, endowments, and family funds face when devising strategies that emphasize long-term returns. Donna Dean, chief investment officer for the Rockefeller Foundation, noted that all of these organizations face a similar problem: “We all struggle with the short-term focus when the structures that our clients would be best served by are very long-term.”