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OECD Journal: Financial Market Trends

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The articles in Financial Market Trends focus on trends, structural issues and developments in financial markets and the financial sector.

English

Financing Future Growth

The Need for Financial Innovations

Attracting long-term investors from the private sector or in public-private partnerships for stable long-term investment in the innovative sectors and industries needed to generate sustained growth is crucial. Long-term investors want assets that generate regular cash flows, often linked to inflation. While equities seem today less appropriate for long-term investors’ needs, particularly in the context of the recent regulatory changes, inflation-linked bonds, very-long dated conventional bonds, project bonds or specific derivatives better meet their requirements. It seems highly likely that the expansion and increasing regulation of long-term investors in both developed and emerging countries will trigger the development of new financial instruments compatible with long-term investment. While long-term investors are the natural sources of growth financing, they are not necessarily capable of assuming all the associated risks. Establishing and/or developing national or supranational institutions that can partly assume or at least structure some of these risks and thus offer end-investors the products they need is therefore essential. Strict regulation of the new markets arising from this process will also be vital.

English

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