One of the lesser known facts is that as researchers, we extend this concept of diversification to investment teams. When we evaluate actively managed funds, one of the metrics we consider is diversity of thought in the investment teams. We assess whether the team are all from similar firms in the industry or have worked together for so long that they could be susceptible to group think, which can result in unchallenged decision-making. We often look for evidence of external hires or junior professionals who can provide some challenge to the investment ideas under consideration and prompt more rigorous debate.

Diversity of thought is closely linked to diversity and inclusion – as evidenced by the case studies discussed in this article, the investment teams with a high success rate are typically those that have smart people who think differently, who have been trained differently, went to different schools, have different knowledge bases and have different genders and ethnic backgrounds. Global economies and supply chains are now so inter-linked that challenges or regulations in one country can have significant effects on the economy of another country. A diverse and well-networked group of professionals is likely to have the best chance of responding to such challenges.

Read the case studies and see how you can assess diversity of thought in your asset managers.