Guest contributor Steve Deutsch, CFA, CAIA, Director of Separate Accounts/Collective Investment Trusts and the Pensions, Endowments, and Foundations Database, Morningstar, Inc. says that despite all the talk of "transparency", the micro-economics of the institutional investment industry often prevent the message from getting through.

As we continue to experience an economic and financial correction, all sorts of remedies have been prescribed.  Most recently, the Investors' Working Group, composed of the Council of Institutional Investors and the CFA Institute, have made several recommendations.   And no less an authority than the Pope himself has weighed in on the subject in his June 29th, 2009 Encyclical Letter, which the Financial Times summarized as a condemnation of capitalism's failures and a call for stronger government regulation.

A standard elixir during financial calamities, in years past and right now, is always "transparency".  But what exactly does this mean for institutional investors?

"Shenanigans"

While the world may be "flat" when it comes to global trade (see Thomas Friedman's "The World is Flat: A Brief History of the Twenty-first Century"), the world is still as round as ever for financial markets (as proposed by author David Smick in "The World is Curved: Hidden Dangers to the Global Economy.")

Smick argues that:

    * "The United States, once a bastion of trust for its transparency...is beginning to be viewed with some skepticism around the world..."
    * "...no sensible market participant I know questions any longer the need for greater transparency..."
    * "...transparency is a key to the long-term stability of global financial markets..."

Like peace, in concept, transparency is an easy sell.  Obtaining agreement on specific and meaningful measures is the challenge.  So the question facing many in the alternative investment industry is "Can real progress be made in addressing transparency for institutional investors?" Guest contributor Steve Deutsch of Morningstar says that despite all the talk of "transparency", the micro-economics of the institutional investment industry often prevent the message from getting through. 

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