The Human Factor: A multi-asset perspective

I was presenting to a client recently alongside two of our competitors. We had each been asked to outline what our investment philosophy is and how we aim to generate performance. The natural tendency when asked to do this is to launch into a description of an organizational chart, often overlaid with a global map to emphasize the resources and scope of one’s company, followed by an investment process flow chart and then the exposition of a series of models. If the time allocated is sufficient, it is often customary to then outline a series of “best ideas” designed to showcase the brilliance of the portfolio manager and his command of the subject matter.

But does this really answer the question of how we aim to meet our clients’ objectives?

In my view, it all starts with a recognition that investment is about people. The “market” is an agglomeration of millions of souls seeking to generate wealth. Our investment teams are microcosms of the broader market environment. The question of how you create a high performing investment culture is inextricably linked with the individuals involved and how they interact with each other. Indeed the importance of human behavior to market performance is the reason why investment philosophies are necessary. If investing were an exact science, there would be no need for a philosophy, we could just calculate the exact intrinsic value of any cash flow and that would determine the correct price of the asset.1

1Minihan, J (2006) The role of investment philosophy in evaluating investment managers, Journal of Investing, Summer.

The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.