The three mindsets investment teams share

Many factors contribute to success, but the best-performing teams have important cultural hallmarks

The three mindsets investment teams share

In the world of investing, professional teams can diverge in terms of the geographic exposures they prefer, the types of assets they hold, the level of risk they can tolerate, and a host of other dimensions. But focusing on the most successful teams reveals one area of common ground: culture.

“Our research on top investment teams — quant teams, among them — found that they all reflected mindsets associated with psychological safety,” wrote Jim Ware, CFA and Michael S. Falk, CFA, in a piece published by the CFA Institute.

Referring to their work at Focus Consulting, Ware and Falk noted that the best teams rated five factors as keys to success: continuous improvement; development of team members; commitment to one another; enjoyment in working together; and capacity for good debate.

“To nurture these mindsets, psychological safety is a necessity,” they explained, stressing that a fearful, vindictive environment prevents those factors from truly flourishing. To create psychological safety, they continued, requires an overarching atmosphere of mutualism, which holds that mutual dependence is necessary to social well-being.

“Indeed, most teams — whether they’re strong, weak, or somewhere in the middle — tended to share a sense of Mutual Purpose, a powerful drive to outperform and create value,” they said.

Aside from that sense of aligned interest, they said the best-performing teams practice three additional “mutuals”:

  1. Mutual Understanding: Curiosity – this involves a desire among team members to hear and comprehend other viewpoints. “Great investment team members are more interested in getting the facts on the table and searching for the truth than they are in winning the argument or looking good,” they said.

Listening deeply to others, using language like “help me understand… “, and holding onto one’s views lightly are some behaviours that they attributed to the most curiosity-committed investment teams.

  1. Mutual Respect: Candor – Focused more on expression, this requires delivering ideas without putting others on the defensive, or otherwise demeaning or attacking them. This type of “forthright diplomacy,” Ware and Falk said, is a fine balance that simultaneously avoids sugarcoating a point and negating or disrespecting others’ views.

Phrases such as “I see it differently,” “based on the facts we’ve agreed to,” and “if I may play devil’s advocate,” they suggested, allows people to express their points of view while accepting that others may be right. “After all, investments are a bet on the future. None of us know if our perspective will turn out to be correct,” they said.

  1. Mutual valuing: Appreciation – the last crucial component of psychological safety, it entails a practice of “success spotting” rather than “fault finding.” Investment leaders have offered several reasons why they don’t practice this, including a belief that showing appreciation would lead to workers asking for more money or reducing the effort they put in at work, or that handsome compensation and a “no news is good news” status quo are enough.

Acts of appreciation, Ware and Falk suggested, could include paying attention, offering a tokens for small wins, doing acts of service, and offering sincere and specific praise. The ideal appreciation-to-criticism ratio, they added, is five-to-one.

“Successful investment teams realize that creative and candid discussions are crucial to superior decision making. But they can only take place in a safe environment,” they said.


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