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“Justice is the source of all the other virtues. For it’s through justice that we understand what is due to others.” - Marcus Aurelius
Have you ever wondered why the most important asset class of the current era is called equities?
The story is deeply rooted in human mythology. It starts with the social imperative to impose order and morality to enable a society to function. This requires the idea that outcomes must be weighed carefully and impartially, rather than randomly and capriciously.
As such, scales have been used as a symbol of balance, justice, fairness, and order for millennia. The ancient Egyptians believed that the virtuousness of a life was established by weighing the heart of the deceased against a special ostrich feather. The Greeks emphasised balance and harmony, with the key insight that nothing is permanent, so nothing can dominate forever. In early Greek mythology, the Titaness Themis primarily used her scales to maintain cosmic order. Dike, her Olympian daughter and the goddess of human justice, was also depicted carrying a scale. She was the inspiration for Lady Justice in Roman myth, with a sword added in later depictions to symbolise enforcement.
This brings us back to equities in the modern era. The Romans had a vast and diverse empire to run. This required the introduction of additional deified personifications (or virtues) to assist in the orderly management of more complex relationships. In the interests of preserving justice and social harmony, the emperors championed a feminine virtue, which was also depicted holding scales. She was often minted on coins as a symbol of fair trade and sound currency, cleverly linking the emperor to the notion of prosperity. She was called Aequitas.
From this root, equity entered the English language in the early 14th century, with an original meaning of “fairness, impartiality, or equality in treatment”. The term shifted to finance in the 17th century, acquiring the further meaning of the residual value of assets after deducting liabilities. By the early 20th century, it also became synonymous with ordinary shares in a limited company. The naming convention highlighted equitable ownership, emphasising that all shareholders have a fair and proportionate claim on the profits and assets of the business.
The concepts of fate (uncertainty), impermanence, fairness, balance, and impartial judgment remain highly relevant to the modern investment environment in which we operate today. Successful long-term investment outcomes require us to embrace the uncertainty inherent in the forward-looking activity of investing, as we remind you in our personal finance article, Equities and Endurance. Chris Cheetham, Head of Global Developed Markets Research, explains how investors need to demonstrate careful judgment when applying the seemingly simple concept of investing in quality shares; Portfolio Manager Godwill Chahwahwa illustrates this judgment in his assessment of Mondi; and Equity Analyst Humaira Survé reviews the AI landscape, the major current source of disruption and change, not only in the investment markets, but across society. And for an example of the importance we place on fairness and equitable treatment of our clients, you have to look no further than our motto, Trust Is Earned.
As always, I invite you to get in touch with us via clientservice@coronation.com if you want to discuss any aspect of your investment portfolio or our service to you.