Going above and beyond: stronger investment theory and practice

There are significant limits to mainstream investment theory and how it is used in practice. This paper presents a stronger investment model that acknowledges and begins to address the complexity innate to the investment industry. As a result, we argue that investment practice should adopt a few organising principles:

  • Harness the power in values and beliefs processes to create the foundations to portfolios
  • Adopt realism with respect to comparative advantage in in-house/out-house skill
  • View risk in multiple ways particularly in mission impairment
  • Recognise risk is both an across-portfolio and across-time challenge
  • Recognise ‘mind-set’ as the biggest hindrance to, and opportunity for, long horizon investing
  • Integrate ESG/extra-financial factors for sustainability and responsibility
  • Enhance portfolio construction by reference to portfolio quality and risk management plan.