The concept of investment beliefs is the basis for strategic management and, while widely used in other parts of the world, is “innovative” from a US perspective, Allan Emkin, managing director of Pension Consulting Alliance, says.
In a session at the Risk Summit, convened by World Pension Forum and Conexus Financial, publisher of conexust1f.flywheelstaging.com, Emkin said he favoured the investment beliefs investigations being undertaken by some of his clients.
“In my 30-year career, people have implied investment beliefs but never explicitly had them. It provides a vehicle to provide a discussion in depth.”
Emkin is consultant to CalPERS, which is currently undertaking an investment beliefs process that has included discussions with staff, the board and consultants as well as an offsite workshop.
“The most important thing that has come out of the process, in my opinion, is it has dramatically improved dialogue between staff and the board about what is important for a large institutional portfolio,” he says.
Emkin said he was personally pleased that a number of the investment beliefs the board has adopted are not textbook – such as risk being multi-faceted and not fully captured by tracking error.
“I personally hate tracking error: it is a way to guarantee managers never get fired because they have a band within which to operate.”
For the story on the CalPERS investment beliefs workshop and a list of the draft investment beliefs, click here