Imperial College establishes new Centre for Capital Market Dysfunctionality

Leading figure of the Fund Management industry makes £4m donation to Imperial College's Tanaka Business School to boost research into financial market inefficiency and its consequences.

Dr Paul K. Woolley, founder and former Chairman of GMO Europe, a fund management firm based in London, is donating £4m to Imperial College's Tanaka Business School in order to create a new Centre for Capital Market Dysfunctionality. The official signing ceremony took place today at Tanaka Business School.

Financial market efficiency is often taken to mean that available information is rapidly and fully incorporated into market prices, eliminating further opportunities for private profit. However, private profit is not the only benchmark. Informational problems can imply that what is individually optimal can generate outcomes that are collectively suboptimal. Such dysfunctionality or social inefficiency in financial markets is an important area of study, and has far reaching consequences.

The corporate finance literature has examined extensively how such problems arise when shareholders delegate decisions to corporate boards of directors. There has been remarkably little research on the similar problems that arise when investors delegate decisions to asset managers. It is commonly assumed that benchmarking managers against average performance generates herding by asset managers, with implications for asset price volatility and the efficiency of the wider economy, but how much do we really understand the behaviour that is induced and the costs that it imposes?
 
The newly created Centre for Capital Market Dysfunctionality will focus on these and similar issues, analysing why inefficient outcomes arise, the impact that they have on the economy, and how such adverse effects can be mitigated.
At today's signing ceremony, the Rector of Imperial, Sir Richard Sykes, acknowledged Dr Woolley's generous gift, pointing out that "the Finance Group within Imperial's Business School is rapidly being recognised as a centre of excellence in quantitative finance and risk management. Paul Woolley's magnificent gift will allow us to bring new talent into Imperial and will cement our reputation for deploying leading-edge techniques to work on practical problems of concern to society as well as business."
The Centre will operate within the Tanaka Business School's new Risk Management Lab that acts as an umbrella for all the School's research in quantitative finance. The Principal of Tanaka Business School, Professor David Begg, added that "Paul Woolley's contribution will extend well beyond the financial support that he is providing. His experience in the industry and understanding of the problems that it faces will help shape our research. I expect the Paul Woolley Centre quickly to become the focus of international research in this field".

About the donor
Dr. Paul K. Woolley is the founder, and  was until recently Chairman, of GMO Europe, a fund management firm based in London, having previously been on the main board of its parent group GMO in Boston USA until 2003.
He was Esmée Fairbairn Lecturer in Finance at the University of York 1971-76, subsequently joining the IMF in Washington 1976-83 before joining GMO. His research interests are in the field of finance and portfolio investment. He has published extensively both in academic and professional journals and is a frequent contributor to the Financial Times.
Dr Woolley will now chair the Advisory Board of the Paul Woolley Centre for Capital Market Dysfunctionality at Tanaka Business School.

About Imperial College and Tanaka Business School
Consistently rated in the top three UK university institutions, Imperial College London is a world leading science-based university whose reputation for excellence in teaching and research attracts students (11,000) and staff (6,000) of the highest international quality. Innovative research at the College explores the interface between science, medicine, engineering and management and delivers practical solutions that enhance the quality of life and the environment - underpinned by a dynamic enterprise culture. Website: www.imperial.ac.uk

Imperial College's Tanaka Business School is a world-class provider of business education and research, focusing primarily on Imperial strengths in innovation and entrepreneurship, finance and healthcare management. The School offers full-time and executive MBAs, Master's programmes in Finance, Risk Management, International Health Management, Actuarial Finance and Management; and a PhD programme. Its Executive MBA is currently ranked 11th in the world by the Financial Times (2006), by which it has also been ranked top in Europe for entrepreneurship for the last 3 consecutive years.

The Risk Management Lab at Tanaka Business School is directed by Professor William Perraudin. In addition to the Paul Woolley Centre, the Lab also conducts research on quantitative finance, hedge funds, banking, and credit risk.

www.imperial.ac.uk/tanaka

For further information:
Eoin Bedford
Press and PR Manager
Imperial College London
Tanaka Business School
South Kensington campus
London SW7 2AZ
Email: e.bedford@imperial.ac.uk
Telephone: +44 (0) 207 594 9154
Mobile: +44 (0) 772 515 9796

Dr. Paul Woolley
Email: paul.woolley@gmo.com
Telephone: +44 (0)20 7603 7603
Mobile: +44 (0)7901 925007