Despite the central role that decision-making plays in the institutional investment process, most investment professionals would, if pushed, express at least some dissatisfaction with both the process and the outcome of key decisions.
The Thinking Ahead Institute’s working group on better decisions has conducted a year-long exploration of institutional decision-making. It has drawn on both theory
– ie academic research, including management science
– and practice – the collective experience of senior investment professionals working in different roles within the industry.
Earlier this year, the group produced How to choose? A primer on decision-making in institutional investing. That paper described the difficulty of the challenges, identifying two key areas for improvement: (1) the use of technology/machines and (2) the mechanics of groups.
In this paper, we describe a range of possible responses to these challenges, focusing on those facing decision-making groups. Examples include a variety of investment committees and management committees although we believe the learning of this paper can apply to all decision-making groups.
These responses can be thought of as a toolkit. While this is not the most original analogy, it is probably the most apt. For a start, each of the ideas (tools) we cover in this paper is applicable to specific challenges in specific contexts. While some of the ideas are easier to apply than others, they are all – like a craftsman’s tools – more useful in the hands of experienced users. And like any toolkit, this one doesn’t contain everything that might be useful.