The majority of institutional investors and market participants at a corporate governance conference found that investors were responsible for the global financial crisis (GFC).
Delegates were polled at The International Corporate Governance Network held in Sydney yesterday, with 80.6 per cent agreeing that investors encouraged the risky behaviour that led to the GFC.
Around 400 delegates attended the event, which included institutional investors, asset consultants and market participants.
Institutional investors [pension funds] should have standards to adhere to and these standards should be developed by people in the fund, according to Securities and Exchange Commission former chair Richard Breeden.
"Unregulated management of someone else's money is called theft. It should not be hard to argue that institutional investors should comply with standards that are developed by those people who they manage the money on their behalf," he said.
He said state-based pension schemes should comply to state regulation. However, federal governments should not be involved in the governance of these funds.
Investors have also become desensitised to market bubbles including credit and counterparty risk, according to AMP Capital Investors senior portfolio manager Michael Murray.
"With such market bubbles, investors tend to take a short-term view with investment timeframes unaligned to the long term," he said.
"It's no easy solution but perhaps investors should also consider intangible factors such as people, culture and transparency issues when looking to invest in a company."
A few years ago AMP Capital Investors "suffered" when it did not invest in Babcock and Brown and ABC Learning, even though those stocks were favoured by the market at the time, Murray said.
"We maintained our position on long-term investing by focusing on transparency and governance issues. In the end our portfolio benefited from not having any exposure to those two stocks," he said.
