Beware of the Trifecta of Desire

Douglas Isles, Investment Specialist, presented for the second consecutive year at the Portfolio Construction Forum’s Finology Summit in Sydney on 14 February 2018.

Behavioural impacts on investment decisions are well understood but human conditioning also impacts investment communication. Practitioners demand a trifecta from fund managers - performance, simplicity, connection - opening up risks. Performance chasing in fund selection leads to sub-optimal client outcomes, while assessing processes and outcomes is hard and has parallels with stock selection. Simplicity and connection expose recipients to powerful risks of influence; these “tools of selling” contradict “tools of investing”. Disagreement is a barrier to persuasion yet many great investments are contrarian and uncomfortable, while an investment process simple enough to codify will inevitably be replaced by a cheaper automated alternative.

Read Douglas' full speech here. View slides here.

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