“Rather than worrying about today’s problems, the Thinking Ahead Group looks at what tomorrow will bring. We won’t have perfect solutions but at least we can help people understand what’s coming down the road” –Tim Hodgson
In early 2014, Thinking Ahead Group (TAG) rebooted to TAG 2.0 – reflecting a broadening and deepening of its focus. The vehicle for this new focus is the Thinking Ahead Institute, whose mission is to change the investment industry for the benefit of the end saver. The Institute, capturing the ambition of a broad cross-section of the industry, will amplify the call for positive industry change.
TAG 2.0 is based in the UK and also has team members in Australia, Hong Kong and the US, who contribute to its thought leadership activities. The team spends the majority of its time researching the investment industry’s problems of tomorrow and espouses five key activities:
- Associate – think laterally, explore other domains, bring together ideas that others typically wouldn’t combine
- Question – always assume the status quo can be improved
- Observe – continually look for what is really going on rather than what appears to be happening
- Experiment – we don’t know what will succeed, so try different things and different approaches
- Network – with practitioners and academics, to harvest ideas that have the potential to change investment thinking and practice.
The team reads widely, thinks laterally and contributes to debates on areas it is researching. TAG 2.0 contributes to the investment industry by generating fresh intellectual capital from an objective point of view. What adds value for institutional investors are the (relatively few) ideas that materially alter their portfolios going forward.
Innovations from TAG include new perspectives on:
- Agency issues: recognition that conflicts, even if subtle, need to be surfaced and dealt with
- Beliefs: new thinking showing that all investment is necessarily beliefs-based (there is no certainty)
- Complexity: a rejection of modern portfolio theory and simple equilibrium economics as the underlying “truth”
- Diversity: a hedge against the models and assumptions underlying traditional diversification
- Dynamic asset allocation: new thinking arguing that risk premia vary and can be harvested dynamically
- Extreme risks: traditional risk measures underweight the consequences of extreme outcomes
- Governance: internal oversight resources affect investment outcomes, and can be enhanced
- Long-term mandates: adding value by avoiding benchmark constraints and short-term relative measurement
- Long-term risk management: risk is not volatility and, for most investors, risk is long term in nature
- Risk budgeting: a new management methodology for institutional asset owners
- Smart beta: pioneering ‘non-price’ methods of investing
- Sustainability: recognition that short-term focus is at odds with long-term wealth compounding
- Thematic investing: the world is neither perfectly predictable, nor completely random.