SOM Hosts “Future of Finance” Conference

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Scholars and executives from across the country converged to the Yale School of Management on September 9- 10 for the The “Future of Finance” conference. The two-day event centered on “Using Finance as a Vital Tool to Address Major Social Challenges,” and the speakers included Sterling Professor of Economics Robert Shiller, Yale Law School Professor Roberta Romano, CEO of the Harvard Management Company Jane Mendillo.

The primary points of discussion included the impact of post-financial crisis regulation on liquidity, the inevitable risks of increased technology in retail banking, and the direction of the asset management industry. Despite the broader idea of the conference, there were also some inevitable forays into the pressing questions of immediacy such as impact of the rate rise on the high-yield debt markets or emerging currencies.

Several speakers and subsequent discussions groups referred to the challenges of financial innovation, albeit with varying degrees of certainty and confidence. The keynote address by Wilbur Ross, of Wilbur Ross & Co. noted the increased challenges of disruption to traditional models of banking, such as P2P lending, however he also highlighted the tremendous investments modern banks are making to stay on top of their game. An unresolved area of discussion was whether these new disrupting technologies shall be stifled by regulation or alternatively whether large banks facing excessive regulation shall lose future business. A panel on “markets” chaired by Schamm Professor of Finance Nicholas Barbaris, brought up questions of over valuation in technology venture capital. David Teten, a partner at FF Venture Capital, particularly highlighted over-valuation occurring in both late stage funding of large established startups, and at seed level funding of founders and their teams. However despite the commentary on overvaluation in technology, the rise of new illiquid asset classes was considered an unstoppable force and these include patents, litigation finance, angel investing and the domain name business. Andrew Lo, spoke about the perceptions of financial engineering and quite literally whether financial innovations will “cure cancer?”

What does the “future of finance” future behold for the average and unsophisticated participant in the economy and financial system? Ashvin Chabbra suggested a new wealth management paradigm for “the aspirational investor” that is meant to meet the goals of average households and mitigate the risks of large downturns. Robert Shiller spoke boldly about financial innovation’s central role in the Good Society[1] and laid out his vision for the “future of finance” which amongst other things involves a more thriving deriviatives market for real estate, the tying of government debt markets to GDP, and benefit corporations[2]. Shiller’s new financial instruments and innovations, whilst sounding radical, indicate the broad trends towards increased risk protection that finance foresees for the average participant.

[1] See further Finance and the Good Society

[2] http://www.policyinnovations.org/ideas/video/data/000396

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Abhinav Menon

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