Using psychology to support performance

Monday 25 March 2019

Behavioral image

Author: Maha Khan Phillips

Hermes Investment Management is a £33.5 billion socially conscious asset manager. In August 2017 its head of investment, Eoin Murray, introduced a behavioural psychologist to the team, in an initiative that then took on a life of its own.

When Eoin Murray joined Hermes Investment Management in 2015, he was well aware that he was taking over the stewardship of a high performing investment team. The challenge, therefore, was to ensure that performance remained consistently strong over time.

“These were skilled asset managers with three year-weighted asset numbers that I considered to be exceptional. So it struck me that a big part of my job as the CIO was to support the fund managers and make their lives easier, so that we could continue to deliver results to clients,” he explains.

The company had been working with Inalytics, the behavioural analysis firm, for some years, and Murray had a novel idea: In August 2017, he brought in a behavioural psychologist to help really drill down into some of Inalytics’ findings on manager decision-making.

But then, he says, the project took on a life of its own. “When the behavioural psychologist talked to fund managers, it became clear that they have this difficult task of being asked to run the equivalent of back to back marathons and come in the top three performers all the time. So resilience became a real focus of discussion with the managers, and she began to become involved in talking to them about how they might build greater resilience.”

So why is resilience important? Murray says it’s because a lot of what managers do is about having the courage of their convictions. “A good asset manager has a clear philosophy, and implements it well. But if there are factors that make their approach go out of favour, it is very easy for an asset manager to start tinkering with their approach,” he explains.

The project began with 11 lead portfolio managers. There are now about 14 people involved. “The response I get from the managers is incredible. They love it. They would do more of it if they could. It’s become a valuable part of working at Hermes for them,” says Murray. 

Managers sit down for a generalist one to one counselling session once a month. Every six months, Murray joins the session “so that it becomes a three-way session, which gives the fund managers the opportunity to talk to me about the direction they are going in.”

He believes that ten years ago, an initiative like this would not have been feasible. “The 2008 Global Financial Crisis was a significant wake up call for the asset management industry. It almost served to repurpose our industry and remind us that we have a huge responsibility of allocating trillions of dollars of capital on behalf of pensioners and savers. It is not just about financial returns; it’s about producing holistic returns. We are helping people retire and save better, and we are increasingly concerned about ESG factors and responsible investing. That’s led us to focus on what we need to do to make our employees’ lives better,” he argues.

While it is too early to say what the long term success of the initiative may be – it’s been going on for less than two years – Murray is already thinking of other ways to support the team. “One of the big issues that professionals face is the effect of sleep patterns on our decision making. I am very keen on investigating that. Would our fund managers benefit from having a sleep coach to have them come in with a fresher mind and greater focus? If helping our fund managers with better sleep quality can lead to better investment decisions, then that a good outcome for our clients,” he says.




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