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As part of our commitment to public sociology (see REF3a), we have prioritised making Edinburgh sociological research on financial crises available to wider audiences: financial practitioners, policy makers and interested members of the general public. This has been primarily via six essays by Donald MacKenzie in the London Review of Books (LRB) and two invited articles in the Financial Times, listed in section 5.3. The impact of this research is in enhancing cultural understanding of finance and contributing to critical public debate. Evidence of its significance and reach includes: (a) public recognition (eg Prospect magazine naming MacKenzie amongst the 25 intellectuals with most impact on the "public conversation" about the financial crisis); (b) articles by others in prominent sources (the Financial Times and Economist) drawing on his work; (c) use of the Edinburgh University research in a major US corporate lawsuit; (d) reprints of the LRB articles eg in French and German public affairs magazines, in the booklets accompanying a Swedish exhibition and a Belgian art video, and in two financial-practitioner magazines.
Equity investors have twice suffered large losses, known as `drawdowns' on their investments in the last dozen years: in 2001 and 2009. This applies to both individuals and institutions and has had an adverse effect on both individuals' living standards entering retirement and the attitude of individuals to the advantages of long-term asset accumulation. The research of Professor Andrew Clare and Professor Stephen Thomas at City University London has created commercially available investment products that offer superior risk-adjusted returns with a transparent strategy supported by published, peer-reviewed research and which avoid such large losses. They developed a simple `trend following' 'smoothing` technique to create a diversified, developed market equity fund which was launched by WAY Fund Managers in March 2011. At the start of 2013, following the success of this strategy, the researchers launched an investible index, the Cass Trend Master Index, in collaboration with Credit Suisse. This index now forms the basis of several structured products predominantly aimed at institutional investors. In April 2013 the researchers launched another set of investible indices, based on the same investment principles, with Goldman Sachs and Indexx Markets. These focus on single asset classes including equities and commodities.
This case study looks at the impact on the international finance industry and big business of research conducted at Heythrop College by Catherine Cowley. Cowley's work is transforming the ethical framework with which some of the most powerful corporations in the world operate and how they understand their role in society, as well as influencing the direction and content of the public debate over the ethics of finance and business.
The ability of companies and organisations to pay and recover debts affects and reflects the financial health of UK PLC. Research by the Credit Management Research Centre (CMRC) led by Professor Nick Wilson has directly influenced UK government policy and regulation, leading to the development of tools and guidance to alleviate short and long-term financing problems for large and small businesses and organisations. The research has improved understanding of alternative forms of corporate finance for new ventures, growth and corporate restructuring. Improved knowledge has been gained on why some businesses grow and others fail in relation to financing, financial management and governance. Research has led to changes in the debt management systems and procedures in the public and private sector.
This case study charts the influence of the Risk On / Risk Off (RORO) paradigm, developed in research at the University of Oxford in collaboration with investment bank HSBC. Since 2008, RORO has had a significant economic impact on HSBC as well as wider impact on the thinking and actions of investors and other global market participants. Having begun as a specialised research tool within HSBC's foreign exchange team, the RORO methodology was publicised in the advice that HSBC supply to a wide range of major fund managers, corporate institutions and central banks. The research has led directly to a change in the way that asset managers think about investment decisions, with consequent impact on the investment and risk management strategies they undertake. RORO is regularly featured in the financial press and is becoming increasingly mainstream, with coverage in national and international media aimed at retail investors.
The Centre for Management Buyout Research (CMBOR) pioneered a unique live platform that has informed and influenced the work of UK, European and International government agencies, industry, policy makers, practitioners and researchers. For the first time, CMBOR provided systematic research evidence on private-equity buyouts which is an area that is often misunderstood among policy makers and the wider public. The provision of extensive data on over 30,000 European private equity buy-out transactions and quarterly reports / analyses on buy-out activity has served to enhance government, industry and the wider public's understanding and inform the development of policies and practice on a strategic and operational level in the UK, Europe and US.
The Life Market is a major new global capital market for transferring longevity risk from corporate pension plans and annuity providers to long-term capital market investors, such as sovereign wealth funds and endowments, in exchange for a longevity risk premium (paid to the investors by the institutions laying off their longevity risk). Previously, the only source of longevity risk hedging was the insurance industry which, given that so many people are living much longer than anticipated, now has insufficient capacity to deal with this risk (estimated at $25trillion) on a global basis. The size of their future pension liabilities now present serious threats to the solvency of many companies. The longevity bonds and swaps designed by Professor David Blake at the Pensions Institute at Cass Business School, City University London, were integral to the creation and operation of the Life Market. The adoption of these bonds and swaps by investors has served to establish a global capital market investor base contributing towards the long-term availability of longevity solutions, benefiting the insurance and pensions industries, employers and, in turn, employees through greater security of their pensions in retirement.
Professor David Leece's research on household decision making, risk and mortgage design had a significant influence on a fundamental review of the United Kingdom's mortgage market carried out in 2003-4, and consequently has had a major continuing impact on: (i) understanding the role of mortgage market economics in the financial crisis of 2007-8; and (ii) the ability of a global investment bank (and the banking sector more widely) to understand, value and hedge risk in securitised mortgage debt.
The development and introduction of a new international regulatory framework for banking and financial markets (known as Basel III) following the 2007/8 financial crisis has been challenging for all parties. Murinde's research has helped shape the response to Basel III by banking and stock market regulators in Africa. In particular, this work has enhanced the competitiveness of the financial services sector underpinned the articulation of the African voice on the transition to Basel III as expressed at the G20 Summit in Seoul in 2010; and directly enhanced the skills and knowledge of stock exchange regulators. As a result of this impact, the African Development Bank invited Murinde to contribute directly to knowledge and capacity building in Africa, and he was subsequently appointed the first Director of the African Development Institute at the African Development Bank in May 2011, on a three-year secondment from the University of Birmingham.