GLOBAL – Consulting firm Watson Wyatt has confirmed that it is using “psychological tools” to identify the best investors.
"We don't want to go down the route of sending psychometric tests to everyone because it might scare some people,” said consultant Craig Baker. “But what we are trying to do is understand how the psyche of a fund manager works."
A spokesman added: “Essentially we are using (and have been for some time) psychological tools to help identify the best investors.”
Asset management sources told IPE that what consultants need to do is identify the reasons why a manager is doing well, such as whether it is a value or growth manager. “They may be missing the point,” one said.
Baker said the firm has been working with a psychologist for the last year or so. He said the idea was to work out how to ask questions better of fund managers. He added that the firm is trying to elicit responses without the person knowing what answer they’re looking for.
He said: “People put way to much weight on past performance. There’s so much noise in short-term track records.” People with good track records were not necessarily skilful, so qualitative research was “absolutely essential”.
The firm might consider sending psychometric tests to asset managers, he added – but ruled out sending them to all managers as a matter of course.
Meanwhile, the US and European arms of Watson Wyatt have now signed a definitive agreement to combine, following an initial announcement in January.
US-based Watson Wyatt & Co. will buy the around 80% of UK-based Watson Wyatt LLP that it doesn’t own for around $458m in cash and stock, compared to an original purchase price put at $451m. A spokesman said the change was due to changes in exchange rates and stock price.
The two firms, which operated an alliance for 10 years, said: “The combined organisation will have estimated revenues of more than $1.1bn and will include more than 5,800 associates in 88 offices in 30 countries.”
“Our strategic alliance has worked well for nearly 10 years but there’s no doubt that our clients are growing more global with each day,” said Watson Wyatt LLP senior partner Paul Thornton.
“This combination will enable us to build on our past successes in our key markets and move ahead strongly as a truly global firm.”