Ten Ideas to Foster Long-term Investing
How to foster long-term investing in organisations? Brandes Institute Advisory Board members Geoff Warren (who has contributed to SHIFT TO since 2016) and David Iverson have distilled their previous work related to the topics of long-term investing and organisational design into a new white paper, Ten Ideas to Foster Long-Term Investing.
This is the final paper in a trilogy of white papers the authors have produced (for Brandes) on long-term investing, written with investment organisations in mind. The first two papers in the trilogy were primarily concerned with setting out concepts and principles; this third and final paper takes a different tack, aiming to offer best ideas and action items that entrench a long-term mindset into investment organisations.
The ideas are arranged under the four success drivers discussed by Iverson and Warren in an earlier paper from 2018: Investment Beliefs, Governance, Aligned Interests, and People. In short:
1. Ensure that the organisation’s guiding principles – mission, vision, etc. - are unambiguous about a long investment horizon.
2. Stick to your knitting – eg, start with your organisation’s known strengths and areas of familiarity. There is no “one size fits all” prescription for acting as a long-term investor.
3. Slow down the decision cycle.
4. Reframe around progress toward objectives. When it comes to investing for a long-term objective, it may help to frame performance around progress toward that objective rather than historical performance.
5. Touch, pause, engage: close and purposeful engagement between principals and agents all along the delegation chain within any investment organisation is important for fostering long-term investing.
6. Reward behaviour, not just performance.
7. Police the information perimeter to ensure only information with long-term relevance is considered.
8. Make incentives conditional on sustained performance.
9. Employ patient, farsighted people and offer them long careers with purpose.
10. Manage the behavioral flaws or biases that can play a role in shortening investing horizons.
Want to learn about how your organisation can embed long-term thinking? Read the full white paper.
Previous articles from Geoff Warren on SHIFT TO: