Manager Selection & Mandates

Discovering "Phi" - how motivation impacts investment performance

Motivation - the new variable in investment returns

How does the motivation of investment managers impact investment returns? How can this be measured and modified for better investment outcomes? A new study, just released by the State Street Center for Applied Research, in conjunction with the CFA Institute, explores these questions and finds some very interesting answers.

In order to quantify the intangible factor of motivation, the authors derive a new variable, which they call “phi”, standing for Purpose, Habits and Incentives. The research shows that the long-term goals of clients are best served when the “phi” of the investment professional and her firm are aligned with that of the client. The paper is listed below, along with others which touch upon similar questions...

Discovering Phi: Motivation as the Hidden Variable of Performance (State Street)
This ground-breaking study from the State Street Center for Applied Research, in conjunction with the CFA Institute, investigates motivation as a driver of investment performance.

Motivate Phi State Street screenshot

Other papers:

Reflections on the Ten Attributes of Great Investors (Credit Suisse, 2016)
Michael Mauboussin started on Wall Street in 1986. In this paper, he explores the 10 key attributes of great bottom-up investors.

Hallmarks of Successful Active Equity Managers (Cambridge Associates, 2015)
How can institutional investors select active managers to maximize the chance of success? This paper from Cambridge Associates highlights key traits to look out for.

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