Press Release

Asset owners must be more innovative to fulfil investment missions

Research highlights best-practice frameworks that are central to success of world-leading asset owners

June 26, 2017

LONDON, 26 June 2017 – Self-awareness, an understanding of peers’ practices, and adaptability are central to the evolutionary success experienced by the world’s leading asset owners, according to new research conducted by Willis Towers Watson and sponsored by the Australian sovereign wealth fund, Future Fund.

The paper, “Smart Leadership. Sound Followership”, seeks to benchmark and compare practices across 15 world-leading asset owners, chosen from across the North American, EMEA and Asia-Pacific regions and based on their global reputation, strong governance, significant size and thoughtful, outward-looking perspectives. It was produced by the Investment Organisational Effectiveness team at Willis Towers Watson, a group which works with asset owners across the world with a focus on ensuring processes, practices and resources are optimised and fully aligned, to give investors the best possible chance of attaining their investment objectives.

Roger Urwin, Global Head of Investment Content at Willis Towers Watson, said: “With the uncertain and often volatile outlook in capital markets playing on the minds of asset owners in recent years, we have seen a plethora of investment strategy innovations undertaken by the investment community. These have sought to maximise and optimise outcomes through, for example, new approaches to risk diversification. However, there is a growing recognition by those at the forefront of industry thinking that an ability to adapt to a fast-changing landscape is critical, and that this is best achieved by sharing and implementing best-practice.

“Funds which are able to demonstrate more effective decisions through improved cognitive diversity and board-executive engagement, combined with better sustainability and risk management, are the ones emerging as leaders at the vanguard of the global asset owner industry.”

Key findings of the paper include:

  • The importance of diversity – research is revealing that biases in investment decision-making settings are more numerous and deeply embedded than investors readily recognise. Using diversity effectively can help in reducing the impact of biases.
  • Sustainability and long-horizon investing is currently too shallow – sustainability is a critically important emergent subject, yet opportunities are being missed in the overlapping areas of sustainability, ESG, stewardship and long-horizon investing.
  • Boards are having trouble being strategic – boards seem strong in interpreting their fund’s mandates and in ensuring executive accountability, but less so in their development of a strategic dialogue with their executive. This is work in progress, revealing an opportunity for organisations to improve.
  • Risk management is key as the business landscape is changing – to manage risks there is merit in scenario analysis. Studying the investment ecosystem, not just the markets, is critical to anticipate some transformational changes ahead.
  • Funds are evolving their mix of internal and external intellectual property – there can be a better grasp of how to optimise the value chain, including the nature of external strategic relationships. Technology and increased sophistication make network opportunities across funds potentially more valuable than ever.

“The overriding lesson from this study is that self-awareness and cognisance of peer groups has played an intrinsic role in the evolution taking place across the world’s leading asset owners,” said Urwin. “We believe that this will only become more important into the future, particularly given the scarcity of investments that meet the current risk and return targets of many funds.”

About Willis Towers Watson Investment

Willis Towers Watson’s Investment business is focused on creating financial value for institutional investors through its expertise in risk assessment, strategic asset allocation, fiduciary management and investment manager selection. It has over 900 colleagues worldwide, assets under advisory of over US$2.3 trillion and over US$87 billion of assets under management.

About Willis Towers Watson

Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas – the dynamic formula that drives business performance. Together, we unlock potential.