{"title":"Optimal design of investment committees","authors":"Bernd Scherer","doi":"10.1057/s41260-023-00330-3","DOIUrl":null,"url":null,"abstract":"<p>Investment committees are widespread across asset management firms, private and public institutional investors or family offices. Poorly designed boards can potentially destroy substantial value in the investment management industry, yet little research has been undertaken on their optimal design. From my 30-year experience as an investor, CIO for various firms and academic researcher, I believe that typical investment committees come with unaddressed challenges. Using qualitative group discussions to create a consensus view results in biases (group shift bias), incentive problems (free-rider) and aggregation problems. How can we ensure that all investment views enter the investment committee equally? In my opinion, we can learn from evidence gathered in social psychology how committees can make better investment decisions. I suggest creating an algorithmic consensus by averaging anonymous member portfolios instead of informal qualitative discussions towards the end of an investment committee meeting.</p>","PeriodicalId":45953,"journal":{"name":"Journal of Asset Management","volume":null,"pages":null},"PeriodicalIF":1.5000,"publicationDate":"2023-11-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Asset Management","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1057/s41260-023-00330-3","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Investment committees are widespread across asset management firms, private and public institutional investors or family offices. Poorly designed boards can potentially destroy substantial value in the investment management industry, yet little research has been undertaken on their optimal design. From my 30-year experience as an investor, CIO for various firms and academic researcher, I believe that typical investment committees come with unaddressed challenges. Using qualitative group discussions to create a consensus view results in biases (group shift bias), incentive problems (free-rider) and aggregation problems. How can we ensure that all investment views enter the investment committee equally? In my opinion, we can learn from evidence gathered in social psychology how committees can make better investment decisions. I suggest creating an algorithmic consensus by averaging anonymous member portfolios instead of informal qualitative discussions towards the end of an investment committee meeting.
期刊介绍：
The Journal of Asset Management covers:new investment strategies, methodologies and techniquesnew products and trading developmentsimportant regulatory and legal developmentsemerging trends in asset managementUnder the guidance of its expert Editors and an eminent international Editorial Board, Journal of Asset Management has developed to provide an international forum for latest thinking, techniques and developments for the Fund Management Industry, from high-growth investment strategies to modelling and managing risk, from active management to index tracking. The Journal has established itself as a key bridge between applied academic research, commercial best practice and regulatory interests, globally.Each issue of Journal of Asset Management publishes detailed, authoritative briefings, analysis, research and reviews by leading experts in the field, to keep subscribers up to date with the latest developments and thinking in asset management.Journal of Asset Management covers:asset allocation hedge fund strategies risk definition and management index tracking performance measurement stock selection investment methodologies and techniques portfolio management and weighting product development and innovation active asset management style analysis strategies to match client profiles time horizons emerging markets alternative investments derivatives and hedging instruments pensions economics
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