Short-termism in business leads to various temptations and risks, according to LGT CEO and chairman Prince Max von Liechtenstein who called annual returns «meaningless».

Especially in the digital era where live information is easily accessible, there is much short-termism at play ranging from share price movements by the second to short-term earnings. According to LGT CEO and chairman Prince Max von Liechtenstein, this mindset is impractical. 

«Annual returns are just relatively meaningless,» he explained during the «Milken Institute Global Investor’s Symposium» in Hong Kong. «You should care about what you make over five, 10 years. There are so many short-term things that can make one year look incredibly good or incredibly bad. Short-term orientation that is inherent in human beings is one of the root causes for a lot of problems.»

Private Market Bull

Prince Max’s comments on annual returns relate to a broader response about his optimism on private markets and its associated investment approach, which he believes to be better than public market investing.

«If you reflect about the returns in the past, private equity has generated, of all the asset classes, the highest returns. And I don’t think it’s because the underlying companies are naturally better. I think it’s just because […] your approach to investing is superior,» he said on a panel at the event hosted by US think tank Milken Institute, highlighting examples like deeper due diligence and closer interaction with firms. 

Under-Representation

LGT CEO's comments originate from real experience as he started his financial career in the private equity industry as a New York-based investment analyst in 1993. Since then, private markets have grown exponentially but he believes there is still potential.

«I believe while a lot of money has come in and it is becoming more and more competitive, I still think it’s under-represented, certainly with private clients because they don’t like being locked up and having less liquidity,» Prince Max said. «I do think it will continue to potentially have slightly better outcomes.»