High Performing Investment Teams
HPIT is flat out one of the best management books and a must read. It is a seminal work on managing the culture of investment teams but its approach and lessons are general enough to apply fruitfully to almost any research team. An absolutely critical point is that leadership is key. While many investment firms flourished in the 1990s, a great deal of that success was due to exceptionally favorable conditions as opposed to exceptionally good leadership. These problems continue to plague the industry today as far too many firms remain more focused on asset gathering and transaction generation than on problem solving and value creation.
Ware starts the book with one of the more interesting paradoxes in the investment world: “Interestingly … the number-one value that investment firms aspire to have is ‘collaboration/teamwork’. It is one of the top 10 values chosen by every single investment firm we have surveyed. In an industry renowned for stars and individual contribution, we find this a remarkable statistic.” Indeed, many investment teams aren’t really “managed" at all. “Most investment professionals make the mistake of thinking that when they understand the concept behind, say, choosing curiosity over defensiveness, the game is over. They’ve got it. They understand it … but doing it is far more difficult." The barrier between cognition and appropriate behavior can be a big one but the path to improvement, as Ware describes, is through curiosity. "In the face of feedback, top teams choose curiosity over defensiveness. The number-one characteristic of good leaders, according to the Center for Creative Leadership, is their capacity for learning."
A number of important lessons can be taken from HPIT. One is that new leadership is needed for the industry. Leaders who are truly curious and truly interested in creating an environment conducive to high performance by its investment professionals will be able to create competitive advantages. This will be increasingly important as fee pressures will continue to erode compensation opportunities, as students entering the workforce increasingly eschew business activities that don't serve a socially useful purpose, and as Silicon Valley often provides a more desirable environment to collaborate and learn. Another lesson is that analysts can go a long way in helping themselves by practicing curiosity when they are challenged. Given that for many of us our identity is tied closely to what we know, it can be easy to perceive disagreements as disapproval or incompetence. Ware shows us that we can make a better choice.
In sum, Ware makes a significant contribution to management literature with this book and in the process leaves those of us who have worked in investment firms nodding in recognition of the many cultural conflicts endemic to the research world and those of us who really want to learn inspired to implement his many valuable lessons.
by David Robertson, CFA
Ware starts the book with one of the more interesting paradoxes in the investment world: “Interestingly … the number-one value that investment firms aspire to have is ‘collaboration/teamwork’. It is one of the top 10 values chosen by every single investment firm we have surveyed. In an industry renowned for stars and individual contribution, we find this a remarkable statistic.” Indeed, many investment teams aren’t really “managed" at all. “Most investment professionals make the mistake of thinking that when they understand the concept behind, say, choosing curiosity over defensiveness, the game is over. They’ve got it. They understand it … but doing it is far more difficult." The barrier between cognition and appropriate behavior can be a big one but the path to improvement, as Ware describes, is through curiosity. "In the face of feedback, top teams choose curiosity over defensiveness. The number-one characteristic of good leaders, according to the Center for Creative Leadership, is their capacity for learning."
A number of important lessons can be taken from HPIT. One is that new leadership is needed for the industry. Leaders who are truly curious and truly interested in creating an environment conducive to high performance by its investment professionals will be able to create competitive advantages. This will be increasingly important as fee pressures will continue to erode compensation opportunities, as students entering the workforce increasingly eschew business activities that don't serve a socially useful purpose, and as Silicon Valley often provides a more desirable environment to collaborate and learn. Another lesson is that analysts can go a long way in helping themselves by practicing curiosity when they are challenged. Given that for many of us our identity is tied closely to what we know, it can be easy to perceive disagreements as disapproval or incompetence. Ware shows us that we can make a better choice.
In sum, Ware makes a significant contribution to management literature with this book and in the process leaves those of us who have worked in investment firms nodding in recognition of the many cultural conflicts endemic to the research world and those of us who really want to learn inspired to implement his many valuable lessons.
by David Robertson, CFA
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