The Diversity Project – an initiative to create a more diverse and inclusive UK investment industry – has announced a new research project that aims to add value to all within the investment world.
It will examine the business case for cognitive diversity and inclusive cultures in the investment industry through a project that will develop existing academic work on cognitive diversity.
The project will explore this in connection with the performance of investment teams and test whether case studies bear out connections between a team’s cognitive diversity, the inclusiveness of the team culture and investment performance. The hope is that these findings will help firms build the best performing teams.
The motivation for this project is the desire to improve the performance of the investment management industry through a better understanding of the linkage between cognitive diversity and the performance of teams.
There is clearly more work to be done to identify any linkage between the composition of a team, the way team members interact and the team’s output.
Ongoing failures, said the Diversity Project, suggest groupthink still prevails even if a company’s board and management teams are demographically diverse.
“We are aware of existing rigorous primary research suggesting proper cognitive diversity can lead to better team performance, although also situations where it can be a hindrance,” read the Diversity Project’s research proposal report. “We would like to explore this in connection with the performance of fund management teams and see if case studies bear this out in the investment industry.”
Open research
The outcome could provide radical new research into diversity and investment and how issue is assessed and used within the industry.
“We are looking to examine the business case for cognitive diversity and inclusive cultures in the investment industry. We are entirely open to what the research reveals,” the report added.
In this regard, the project has a four-pronged approach.
One, to explore the linkage, if any, between cognitive diversity and the performance of investment teams.
Two, highlight approaches that can help create strong-performing teams within investment firms.
Three, how to avoid or mitigate the risk of groupthink.
And four, explore any difference in outcome in situations where diverse perspectives are shared and challenged.
“We hope that the research will provide the basis for creating these outcomes, but again accept that we may not be able to demonstrate any or all of these,” the report said.
As part of this, the Diversity Project has created a number of questions to address to which the project would like assistance from the investment community in addressing.
One, how can cognitive diversity be measured? And how does this apply to investment teams?
Two, is there a linkage between cognitive diversity and the success of an investment team? The project de nes success for these teams as risk-adjusted investment performance.
Three, what are the critical additional factors that might enhance or detract from the team’s performance? And again, do any of these apply to a greater or lesser extent for investment teams?
Four, are there specific risks which cognitive diversity mitigates, for example, groupthink, risk of investment underperformance or loss from excluding ideas?
And five, is there a linkage between cognitive diversity, plus other factors, and an investment team’s success, and can it be demonstrated that this is more than mere positive correlation?
Portfolio progression
This comes as the Diversity Project launches its third iteration of its Pathway Programme for portfolio managers.
The latest track will include 10 participants and focus on specialised sessions on exchange-traded funds, equities, derivatives, fixed income, data and modern trading platforms.
It will include new team members as mentors: Shyla Hoenigschmid-DeVeaux and Emma Hamilton. Hoenigschmid-DeVeaux has spent more than 10 years as a portfolio manager at JP Morgan and was a founding chairperson for the EMEA section of the AWM Black Leadership forum.
Launched last year, the programme aims to create a pathway for more women to become portfolio managers.
It has the support of more than 40 investment firms and is led by Diversity Project chair Helena Morrissey.
“This is a programme brought to the industry by the industry based on what fund managers know it takes to succeed,” Morrissey said. “Shyla’s experience as a recent portfolio manager will be invaluable here and we are delighted to welcome Shyla and Emma to the team.”
Hoenigschmid-DeVeaux added: “The Pathway Programme is a first of its kind opportunity to truly level the eld and increase access for women into these important roles within the investment industry.”
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