Willis Towers Watson (WTW) research hub the Thinking Ahead Institute (TAI) has issued the call to action to the investment industry this week across Sydney and Melbourne.
After conducting 120 cultural reviews across high-conviction managers, TAI raised concerns with a number of them because of an “undue reliance on one individual” or a “personality cult” as described by WTW strategic advisory consultant Rebecca Bannan.
“Individual talent, superior skill and insight [have] been foundational to the success of this industry, which is why the star fund manager model has evolved and it has indeed flourished,” Ms Bannan said.
“But is it sustainable? Investing has been shifting from an individual game to a team sport. Leadership in the investment industry must demonstrate self-awareness and humility to embrace the team context.
“But this doesn’t mean that we’ve lost our conviction in boutique asset managers, just that we think teams are more positioned for a sustainable future and even the smallest funds can be run with a team.”
Further to the endorsement for teams, TAI has said focusing on more staff creates an opportunity for diversity. The institute has measured gender and racial diversity among funds teams and ruled the sector is severely lacking.
“We have been struggling to find diversity,” Ms Bannan said.
“Not only is it good from a cultural or a social perspective, it limits the ability to generate insights for investment decision-making.”
The funds management industry has already experienced significant change. TAI recorded in the last 10 years, close to 50 per cent of the largest 500 fund managers were no longer ranking in the list: 242 funds in the top 500 last year were not there a decade prior.
TAI’s clients look to it to help them to be successful in the long term, which Ms Bannan noted will require organisations to change over time.
The institute last year identified three strategic priorities for the asset management community moving forward: sustainable investing, culture, and inclusion and diversity.
“We believe that it’s important for all organisations regardless, regardless of their size, or asset class to get these priorities right to become a successful investment organisation of tomorrow,” Ms Bannan said.
“[Sustainable investing] is an area where we are experiencing the most profound and multidimensional change. It affects everything and everyone, and will critically require a significant mindset shift to investments. To achieve successful investment outcomes and build your organisation’s future, it is more critical than ever to be clear about your beliefs.”
‘People in this room influence trillions of dollars’
TAI is pushing for fund managers to consider impact equally alongside risk and return.
It has also asked that investors consider benefits across companies’ clients, employees, broader society and the planet.
Also needed, the TAI said, is a longer time horizon in considering investments for asset owners and managers.
“We believe that sustainability factors carry material impact on financial outcomes,” Ms Bannan said.
“But we also believe that extra non-financial motives, such as investing for a world we actually want to live in, a meaningful role and they should be seriously considered by investors. As a result, we have been going through a significant mindset shift ourselves, which has changed the way we engage with clients, and asset managers.”
Addressing the room, filled with industry types, she concluded: “There is still more that we can do. The people in this room influence trillions of dollars. And that influence gives us the opportunity for a seat at the table.”
“But it’s our responsibility to take that opportunity to redefine the purpose of this industry to one that is the end goal.
“There is too much resource in our industry that is spent on financial and trading activities that result in little society value, and too little results spent on stewardship and real value creation. We have the opportunity to demonstrate actual value creation to society by looking beyond quarterly returns and valuations and focusing on leadership, culture and stress.”
