๐๐ผ๐ ๐บ๐๐ฐ๐ต ๐๐ถ๐บ๐ฒ ๐ฑ๐ผ ๐๐ผ๐ ๐ด๐ถ๐๐ฒ ๐ฎ๐ป ๐๐ป๐ฑ๐ฒ๐ฟ๐ฝ๐ฒ๐ฟ๐ณ๐ผ๐ฟ๐บ๐ถ๐ป๐ด ๐ถ๐ป๐๐ฒ๐๐๐บ๐ฒ๐ป๐ ๐บ๐ฎ๐ป๐ฎ๐ด๐ฒ๐ฟ?
1. Hire a manager after a period of strong performance.
2. Watch in horror as you donโt experience that outcome, maybe the opposite.
3. Spend a huge amount of time and emotional labour deciding on whether your initial thesis was wrong, something has changed at the manager, or with market dynamics.
4. After sucking up a huge amount of governance time, decide to sack the manager.
5. Rinse and repeat with potentially similar outcomes.
Now that might not be you, but it is a story that plays out regularly.
Experiencing underperformance is one of the unavoidable realities of hiring an active manager. And itโs painful for everyone; clients, managers and advisers. And badly managed pain creates some predictably bad outcomes for all parties.
One important and manageable issue is time horizon mismatch. And this is what and I explore in the latest episode of Decision Nerds. We discuss
๐ช๐ต๐ ๐ถ๐ป๐๐ฒ๐๐๐บ๐ฒ๐ป๐ ๐ฒ๐ฑ๐ด๐ฒ ๐ถ๐ ๐ป๐ผ๐ ๐ฒ๐ป๐ผ๐๐ด๐ต โ managers need an appropriate amount of time to let their edge play out. It may be longer than you think.
๐ง๐ต๐ฒ ๐๐๐
๐๐ผ๐ป ๐๐ป๐ฑ๐ฒ๐
โ a simple way of articulating time frames that would help everyone.
๐๐๐ฒ๐ฟ๐๐ผ๐ป๐ฒ ๐ต๐ฎ๐ ๐ฎ ๐ฝ๐น๐ฎ๐ป ๐๐ป๐๐ถ๐น ๐๐ต๐ฒ๐ ๐ฎ๐ฟ๐ฒ ๐ต๐ถ๐ ๐ถ๐ป ๐๐ต๐ฒ ๐ณ๐ฎ๐ฐ๐ฒ โ we posit that most peopleโs ability to predict how they will deal with the pressure of underperformance wonโt reflect reality when things get tough.
We talk about the distinct behavioural pressures facing clients, advisers and managers and what they might consider doing to make things easier. A couple of takeaways if you donโt have time to listen.
๐๐น๐ถ๐ฒ๐ป๐๐ - what is your real capacity for tolerating underperformance, how do you know this?
๐ ๐ฎ๐ป๐ฎ๐ด๐ฒ๐ฟ๐ - have a clear view of the timeframe your results should be judged over. Whilst this a tough problem, if you donโt have a view, one will be forced on you.
๐๐ฑ๐๐ถ๐๐ฒ๐ฟ๐ - is your role to be a behavioural bulwark and help clients through this period, or just keep them happy? They are not always the same thing.
More information on the Buxton Index is here: https://lnkd.in/eHXDfkfe
๐๐ผ๐ ๐บ๐๐ฐ๐ต ๐๐ถ๐บ๐ฒ ๐ฑ๐ผ ๐๐ผ๐ ๐ด๐ถ๐๐ฒ ๐ฎ๐ป ๐๐ป๐ฑ๐ฒ๐ฟ๐ฝ๐ฒ๐ฟ๐ณ๐ผ๐ฟ๐บ๐ถ๐ป๐ด ๐ถ๐ป๐๐ฒ๐๐๐บ๐ฒ๐ป๐ ๐บ๐ฎ๐ป๐ฎ๐ด๐ฒ๐ฟ?
1. Hire a manager after a period of strong performance.
2. Watch in horror as you donโt experience that outcome, maybe the opposite.
3. Spend a huge amount of time and emotional labour deciding on whether your initial thesis was wrong, something has changed at the manager, or with market dynamics.
4. After sucking up a huge amount of governance time, decide to sack the manager.
5. Rinse and repeat with potentially similar outcomes.
Now that might not be you, but it is a story that plays out regularly.
Experiencing underperformance is one of the unavoidable realities of hiring an active manager. And itโs painful for everyone; clients, managers and advisers. And badly managed pain creates some predictably bad outcomes for all parties.
One important and manageable issue is time horizon mismatch. And this is what and I explore in the latest episode of Decision Nerds. We discuss
๐ช๐ต๐ ๐ถ๐ป๐๐ฒ๐๐๐บ๐ฒ๐ป๐ ๐ฒ๐ฑ๐ด๐ฒ ๐ถ๐ ๐ป๐ผ๐ ๐ฒ๐ป๐ผ๐๐ด๐ต โ managers need an appropriate amount of time to let their edge play out. It may be longer than you think.
๐ง๐ต๐ฒ ๐๐๐
๐๐ผ๐ป ๐๐ป๐ฑ๐ฒ๐
โ a simple way of articulating time frames that would help everyone.
๐๐๐ฒ๐ฟ๐๐ผ๐ป๐ฒ ๐ต๐ฎ๐ ๐ฎ ๐ฝ๐น๐ฎ๐ป ๐๐ป๐๐ถ๐น ๐๐ต๐ฒ๐ ๐ฎ๐ฟ๐ฒ ๐ต๐ถ๐ ๐ถ๐ป ๐๐ต๐ฒ ๐ณ๐ฎ๐ฐ๐ฒ โ we posit that most peopleโs ability to predict how they will deal with the pressure of underperformance wonโt reflect reality when things get tough.
We talk about the distinct behavioural pressures facing clients, advisers and managers and what they might consider doing to make things easier. A couple of takeaways if you donโt have time to listen.
๐๐น๐ถ๐ฒ๐ป๐๐ - what is your real capacity for tolerating underperformance, how do you know this?
๐ ๐ฎ๐ป๐ฎ๐ด๐ฒ๐ฟ๐ - have a clear view of the timeframe your results should be judged over. Whilst this a tough problem, if you donโt have a view, one will be forced on you.
๐๐ฑ๐๐ถ๐๐ฒ๐ฟ๐ - is your role to be a behavioural bulwark and help clients through this period, or just keep them happy? They are not always the same thing.
More information on the Buxton Index is here: https://lnkd.in/eHXDfkfe