Willis Towers Watson’s Thinking Ahead Institute has given the first public forums into its latest work, providing an insight into the way the researchers and their big pension funds and other member organisations are thinking about the future of funds management. Big changes are on the way.
The Thinking Ahead Institute (TAI), which is funded separately from the asset consulting firm, was started by Willis Towers Watson (WTW) investment chiefs Roger Urwin and Tim Hodgson in 2015. This followed their formation of the Thinking Ahead Group, which remains more closely aligned with WTW, in 2003.
TAI was formed to involve more participants in discussions on how to improve the way the investment industry works, according to Martin Goss, WTW’s head of investment consulting in Australia. It exploited the power of thought leadership, he said, connected people in order to challenge current thinking and to enable them to work together to the benefit of the ultimate investor or pension fund member. The first Australian forums, attended by asset owners and managers, were held in Sydney and Melbourne last week following one in London, where TAI is based.
Both Hodgson and Urwin emphasised the importance of culture and values in investment management – more important to the process than a view on the world of markets. Hodgson said that investment models, which the industry people loved, tended to be based on the tidy world of geometry rather than the messy world of biology and the social sciences.
“Don’t marry a model,” he said. “Don’t get attached to a single description so that you get blinded to a model’s imperfections… Good is good but optimal is not necessarily better. Optimisation can be so finely tuned to the underlying assumptions that only a slight change can have a big impact. Things change. Short-term trends don’t go on forever but long-term reversion is not guaranteed”.
Urwin described the “renaissance investment professional” and what motivated him or her. An organisation’s culture was very important to motivation. Intrinsic motivation included autonomy, mastery (the challenge of being good at your job) and purpose (doing something which is bigger than ourselves or in the interests of others). Extrinsic motivation included work environment and compensation.
“The investment professional of tomorrow will be skilled in both the old and new ways,” he said. “They will be higher performers because they will use technology successfully. And he or she will be a very strong team player.”
The team element to a successful organisation was developed at the forums by Marisa Hall, a senior consultant in the Thinking Ahead Group, who quoted Thomas Malone of the MIT Centre for Collective Intelligence: “Almost all important problems are solved by groups of people.” Cognitively diverse groups had higher collective intelligence, she said. But there had to be a systematic approach to inclusion to reap the benefits.
An interesting challenge to all these thinking people was thrown out by another industry thinker during question time. Graham Hand, the editor and publisher of Australia’s own Cuffelinks investment newsletter, said that in his experience a lot of successful investment management firms were run by a person who might be a very talented investor but often “not nice to work with”. It was, basically, that person and a group of “helpers”. He wondered whether they tended to be more successful than those based on a collaborative model.
You could almost see the audience thinking about exactly the sort of people who Hand was describing. There are a lot of them. But according to Goss, the classic star system for investment managers on which many boutiques have been successfully based, was unlikely to be successful in the future.