11 June 2020 Survey Report

Is the Coronavirus Rocking the Foundations of Capital Markets?

How the economic crisis induced by the coronavirus is impacting capital markets, investment management, and the authorities’ response.

CFA Institute has conducted a survey of its global membership to analyze the effects of the current economic crisis caused by the coronavirus epidemic on financial markets and the investment management industry. It ran worldwide 14 to 24 April 2020.

The uniqueness of the current situation has its roots in the nature of the crisis. It was de facto self-inflicted at a time when the economy was in relatively stable conditions and markets were not displaying specific or urgent signs of stress and imbalance. Public authorities, regulators, central banks, and market operators have therefore struggled to tap into old playbooks to find the appropriate response. Essentially, the actions of public authorities have focused on a clear endeavour to ensure that the widespread economic stoppage does not morph into a full-blown crisis of trust and a dislocation of financial markets.

Is the Coronavirus Rocking the Foundations of Capital Markets? Read the full report (PDF)


CFA Institute set out to survey its members on the effects the coronavirus-induced economic crisis is having on capital markets in general and the investment management industry in particular. We have sought to clarify the debate and public commentary on a few aspects particularly relevant for our core membership and touching upon the economy, regulatory intervention, market impact, ethics, asset management business model, and employment in the financial space.

The survey was fielded to the global membership of CFA charterholders across all regions and jurisdictions where the organisation has representation.

The survey was sent on 14 April 2020 and closed on 24 April 2020.

A total of 167,312 individuals received an invitation to participate. Of those, 13,278 provided a valid answer, for a total response rate of 8%. The margin of error was +/-0.8%.

These are the themes that have been explored in the study:

The shape of a potential economic recovery

CFA charterholders appear more conservative than the current often optimistic tone seen in banking and industrial corners, by largely favouring a medium-term (hockey stick–shaped) or slow-paced economic recovery (U-shaped).

The market impact on volatility, liquidity and price formation

Responses indicate investment firms are not panicking in the face of heightened volatility and lower liquidity, as they are still observing in large part if and how strategic asset allocation should be altered. However, there is a real risk that the current stress could result in specific asset mispricing imbalances.

The interventionism of public authorities

The decision to intervene by supporting the economy and markets appears to be vindicated by respondents. Yet, they are divided on whether this aid should be continued to support the recovery or stopped as soon as possible to allow fiscal rigour and free markets to take over.

The regulatory response

A similar dichotomy is observed in the response provided by market conduct and security regulators. In general, finance professionals seem to agree conduct rules should not be relaxed in times of crisis, yet they also think regulators have a role to play in holding the market’s hands through consulting with industry on appropriate measures. A certain degree of corporate responsibility is also supported as respondents believe companies that have received public support should not pay dividends or pay executive bonuses. However, professionals reject a ban on short selling.

Ethics in times of crisis

There is a risk that the current stressed conditions will generate unethical behaviour in the investment management industry, according to professionals. This should be monitored.

The role of finance and its business model

There appears to be a recognition that markets are an important part of how the economy operates and that it is important to show these markets continue to function appropriately. The crisis will also have a structural impact on the industry as large-scale bankruptcies are expected, but also an accelerated effort to use operational automation to reduce fixed costs.

The active versus passive debate

The jury is still out to determine if a crisis situation could signal a return in good graces of active strategies. A significant proportion of respondents believe this is unlikely, which could indicate deeper foundational shifts in the industry and public perception that the crisis is not altering.

The impact on employment in the financial space

It looks too early to tell if the current crisis will have a significant impact on finance jobs. Most firms appear to be in waiting mode or have resorted to hiring freezes while waiting for a clearer landscape. Yet, a not insignificant proportion of professionals are worried about job security in the short term.

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