Willis Towers Watson has downgraded eight managers and “walked away” from five investment ideas for reasons related to culture within their organisations.
The decisions were made as part of a culture assessment of the consultancy’s highest conviction managers, which it nearly two years ago, said Luba Nikulina, global head of research at Willis Towers Watson.
“An underlying trend was concern about dependency on one individual who has too much power, or to put it more bluntly, a personality cult,” she said at an event held this morning by the Thinking Ahead Institute, whose work has informed WTW’s asset manager research.
“A team approach is what can make a better investment organisation,” added Nikulina.
Fortunately, according to Nikulina, there had recently been a shift in mindset in the investment industry towards a team-oriented approach, although taking advantage of this model was not straightforward.
“It requires a lot of self-awareness and humility from the leadership to be able to take the benefit of the team approach,” she said.
In addition to culture, WTW engages with asset managers on inclusion and diversity, and sustainable investment.
“The investment industry is very non-diverse,” said Nikulina, showing a snapshot (pictured below) of an analysis of some of the consultancy’s preferred managers for its best ideas fund.
“Orange means [there is] zero-diversity, and as you can see there is too much orange on this page despite the fact that we have been specifically focussing on trying to bring more diversity into the teams that manage our portfolios,” she said.
WTW asset manager diversity analysis
In addition to becoming more diverse, asset managers needed to take care to create an inclusive environment.
“That’s the only way you can take advantage of these diverse perspectives and let this diverse talent flourish,” said Nikulina.
Thumbs up for extra-financial motives
With regard to sustainable investment, she said WTW’s beliefs had become much stronger recently, noting for example that the consultancy believed that “extra-financial motives play a meaningful role and should be considered by investors”.
“Successful investment organisations must articulate purpose,” she added, specifying that this should extend to the benefits they bring to “clients, employees, society and planet”.
Stewardship, meanwhile, was “an opportunity for the investment industry to redefine its purpose and demonstrate its value to society”.
“There is too much time spent in our industry on financial analysis and modelling and not enough on stewardship and actual value creation,” said Nikulina.
She praised the UK’s new Stewardship Code for paying attention to purpose, beliefs and culture.