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Capital markets fuel economic growth
20 March 2014
AIMA research supports expansion
Capital markets are significant drivers of economic growth and
increasing their size could compensate for the post-financial
crisis decline in bank lending, according to new research by
two leading academics commissioned by AIMA, the global hedge
fund industry association.
Growing capital markets by one-third could fuel a long term,
real growth rate in per capita GDP of around 20% according to
Christoph Kaserer, Professor of Finance & chair of
financial management and capital markets at TUM School of
Management, Munich and Marc Steffen Rapp, Professor of Finance,
accounting & finance group Philipps-Universität
Marburg School of Business and Economics.
Their research found that capital markets support economic
growth by providing new sources of funding for long term
investment and facilitating improvements in corporate
governance. It goes on to link activities by pension funds,
non-bank lenders and active investors such as hedge funds to
growth in the real economy.
The paper also reveals the extent to which economies
traditionally regarded as bank-based have embraced capital
markets in recent years and suggests that the old distinctions
between the bank-based economic structure of parts of Europe
and the more market-based structure of the UK and US are
Jack Inglis, AIMA CEO said, "This is an important and timely
paper which underlines the strong role capital markets and
their participants play in driving economic growth and
prosperity. It highlights the positive role that hedge funds
and asset managers in general can play. Hedge funds are
important providers of liquidity, risk management and price
discovery in capital markets."
"Although the paper takes as an example the economies of the
European Union, it shows how governments globally can benefit
from a well-developed capital markets policy."
"This is especially true for countries where a bank-based
economic model still dominates. Bank lending clearly is not
keeping pace with demand and the global economic recovery could
be jeopardised unless new sources of financing can be found,
particularly from the investment management community. We would
therefore encourage governments globally to implement policies
that help to protect and grow capital markets."