Social Capital and Building an Institutional Investor's Collaborative Network

25 Pages Posted: 3 Dec 2015 Last revised: 31 Aug 2016

See all articles by Ashby Monk

Ashby Monk

Stanford University

Rajiv Sharma

Stanford University

Wen Feng

Stanford University, Global Projects Center

Date Written: November 29, 2015

Abstract

One of the major trends over the past decade among Long-Term Investors (LTIs), such as pension funds and government funds, has been to move towards a more direct method of investing. The financial crisis of 2008-09 accelerated this ‘disintermediation’, in particular within long-term private market asset classes, where the drawbacks of short-termism and principal agent issues of using certain intermediaries were exposed with disastrous consequences. While disintermediation and in-sourcing offer an obvious path to ensuring a better alignment of interests, the large majority of institutional investors will not have the capabilities to in-source due to the high resource requirements. As such, they need to develop novel, and less resource intensive, mechanisms to overcome the barriers to efficient long-term investment and aligned access to private markets. In this paper, we suggest a networking strategy for institutional investors that may help them achieve their long-term investment objectives creatively. Specifically, we draw upon social capital theory to validate a strategy that involves asset owners comparing, collaborating and ultimately co-investing in private market assets. Such a strategy is central to the new ‘collaborative’ model of institutional investment being used by LTIs.

Keywords: Institutional investment, co-investment networks, private market investing, social capital theory

Suggested Citation

Monk, Ashby and Sharma, Rajiv and Feng, Wen, Social Capital and Building an Institutional Investor's Collaborative Network (November 29, 2015). Available at SSRN: https://ssrn.com/abstract=2698178 or http://dx.doi.org/10.2139/ssrn.2698178

Ashby Monk

Stanford University ( email )

United States

Rajiv Sharma (Contact Author)

Stanford University ( email )

Stanford, CA 94305
United States

Wen Feng

Stanford University, Global Projects Center ( email )

473 Via Ortega, Room 269C
Stanford, CA 94305
United States

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