Fiduciary finance: investment funds and the crisis in financial markets

This multi-faceted analysis of institutional investment defines 'fiduciaryfinance' institutions as the third pillar of the financial system, alongsidebanks and insurers.

It documents the role played by investment fundsand the money management industry during the recent financial crisis,and provides an unashamedly critical review of the business disciplineswhich can dominate investment practices.

It clarifies the economicsignificance of the investment industry (circa $60 trillion in assets) andthe features which differentiate fiduciary finance from traditional financialinstitutions such as banks and insurers.Martin Gold reviews the intellectual foundations of the investmentdiscipline and synthesizes the literature into the principal 'scientificparadigms'.

He explores the legal frameworks (prudential investmentstandards) that govern mainstream portfolio management practiceswhich, combined with the commercial imperatives of the investmentindustry, can create marked differences from textbook depictions ofinvestment management.

Recent events have again called into questionthe worth of the now ubiquitous collective investments such as pensionfunds and mutual funds, and the integrity of the financial markets.

Giventhe trillions of government funds which have been committed to financialbailouts, and the volatility experienced by investors, the author assertsthat a critical analysis of fiduciary finance must question whether betteroutcomes can be achieved.

Tellingly, most fiduciary finance institutionsremain outside the perimeter of macro-prudential regulations.This challenging and multidisciplinary work promises to provide afascinating read for academics focusing on economics and finance,money and banking, as well as for investment and financial servicespractitioners, policymakers and market regulators.