HK in­vest­ment gu­rus ‘pos­sess more work drive’

City’s in­vest­ment pro­fes­sion­als in­clined to do bet­ter than their peers in other re­gions to get higher re­turns, says poll

China Daily (Hong Kong) - - HK | BUSINESS - By DUAN TING in Hong Kong tingduan@chi­nadai­lyhk.com

In­vest­ment man­age­ment ex­perts in Hong Kong are more per­for­mance-driven in their work than their peers in most other re­gions for the sake of higher re­turns, ac­cord­ing to re­search con­ducted re­cently by US-based fi­nan­cial house State Street Cor­po­ra­tion (SSC) and the CFA In­sti­tute — the global as­so­ci­a­tion of in­vest­ment pro­fes­sion­als.

The study, en­ti­tled “Dis­cov­er­ing Phi — Mo­ti­va­tion as the Hid­den Vari­able of Per­for­mance”, iden­ti­fied “phi”, which stands for pur­pose, habit and in­cen­tives, as the yard­stick for de­ter­min­ing how pro­fes­sion­als’ mo­ti­va­tions in the in­dus­try af­fect their per­for­mance and in­vest­ment re­turns.

Ac­cord­ing to the re­port, a one-point in­crease in “phi” is as­so­ci­ated with 28-per­cent greater odds of ex­cel­lent or­ga­ni­za­tional per­for­mance.

The Cen­ter for Ap­plied Re­search — an in­de­pen­dent think tank of SSC — and the CFA In­sti­tute had been work­ing on the pro­ject for 18 months, in­ter­view­ing in­vest­ment pro­fes­sion­als across 20 coun­tries.

“A more com­pet­i­tive fi­nan­cial en­vi­ron­ment turns out to have lower ‘phi’”, said Suzanne Dun­can, global head of the re­search cen­ter at SSC.

Hong Kong turned out to be a city with lower “phi”, com­pared with most other cities sur­veyed within the Asia Pa­cific re­gion, while the Asia-Pa­cific re­gion has the sec­ond-high­est “phi” glob­ally af­ter the Amer­i­cas. Within the re­gion, as­set man­agers are lead­ing the way in “phi”, fol­lowed by as­set own­ers and in­surance firms. And, women had a higher “phi” score than men.

The SAR’s rel­a­tively lower “phi” score could be the re­sult of the short-term pres­sures be­ing felt by pro­fes­sion­als in the in­vest­ment in­dus­try, ac­cord­ing to the re­port. The re­search shows that when there’s a lack of pur­pose to tem­per pas­sion, the bal­ance and align­ment of in­ter­ests and mo­ti­va­tions be­come dis­torted and, ul­ti­mately, the most frag­ile things in the en­vi­ron­ment bear the brunt of the harm.

About 90 per­cent of the re­spon­dents cited pres­sure, in­clud­ing con­cerns about los­ing their job af­ter a short pe­riod of un­der­per­for­mance, from mem­bers of their com­pa­nies’ board and man­age­ment team as neg­a­tively af­fect­ing de­ci­sion mak­ing. Nearly half of those polled cited ca­reer risk con­cerns as a short-term pres­sure in Hong Kong, ver­sus 26 per­cent in the Asia Pa­cific re­gion, 11 per­cent in the Amer­i­cas and 16 per­cent in EMEA (Europe, the Mid­dle East and Africa).

The good news for the Hong Kong in­vest­ment in­dus­try is that al­most half of the in­vest­ment pro­fes­sion­als in­ter­viewed said they pur­sued a ca­reer in in­vest­ment man­age­ment be­cause they are pas­sion­ate about the fi­nan­cial mar­kets.

How­ever, only 14 per­cent of the Hong Kong re­spon­dents said they have re­mained in the in­vest­ment man­age­ment in­dus­try for the pur­pose of help­ing clients achieve their fi­nan­cial goals, while only 7 per­cent said they wanted to con­trib­ute to eco­nomic growth.

Dun­can said Hong Kong’s in­vest­ment in­dus­try has a sig­nif­i­cant op­por­tu­nity to im­prove on “phi”, start­ing with re­cruit­ment and lead­er­ship.

As for lead­er­ship, ac­cord­ing to the re­port, only 39 per­cent of pro­fes­sional in­vestors be­lieved that their lead­ers ar­tic­u­late a com­pelling vi­sion, and 36 per­cent agreed that lead­ers talk to em­ploy­ees about their most im­por­tant val­ues and be­liefs. An­other 31 per­cent be­lieved that lead­ers are spend­ing time teach­ing and coach­ing em­ploy­ees, while al­most half of the pro­fes­sional in­vestors thought that their lead­ers re-ex­am­ine crit­i­cal as­sump­tions and be­liefs.

SSC and the CFA In­sti­tute are jointly or­ga­niz­ing road­shows among fi­nan­cial in­sti­tu­tions and the me­dia with the aim of draw­ing the pub­lic’s at­ten­tion to the is­sue, Dun­can added.

Paul Smith, pres­i­dent and CEO at the CFA In­sti­tute, be­lieves that by fo­cus­ing on “phi”, in­vest­ment pro­fes­sion­als are not merely restor­ing bal­ance to the in­dus­try, but are “mak­ing it eas­ier for ev­ery­thing within our ecosys­tem to find new ways of flour­ish­ing, new ways of cap­tur­ing al­pha”.

BILLY H.C. KWOK / BLOOMBERG

Pur­pose, habit and in­cen­tives, or “phi”, as iden­ti­fied by State Street Cor­po­ra­tion and the CFA In­sti­tute, could af­fect pro­fes­sion­als’ per­for­mance and in­vest­ment re­turns. How­ever, Hong Kong in­vest­ment pro­fes­sion­als’ “phi” score is rel­a­tively low.

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