Knowledge management underutilized by money managers
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • BentallGreenOak agrees to acquire Metropolitan Real Estate Equity
      watch video
      0:45
      Private funds weathered 2020 turmoil
      Daniel McHugh
      Aviva Investors promotes from within for real assets CIO
      Marc Rowan
      More alts managers seek expansion to retail market
    • Kieran Mistry
      Hymans Robertson picks head for new non-traditional risk transfer unit
      Troy Saharic
      NEPC brings on director of new business development
      Bill Foley
      Foley-backed SPAC agrees to $7.3 billion deal with Alight
      Jason Schwarz, chief operating officer of Wilshire,
      New owners have big plans for future of Wilshire
    • Multiemployer pension measures cleared for relief bill vote
      The Charging Bull statue is covered in snow near the New York Stock Exchange on Feb. 11, 2021
      Bain: Private equity managers finish 2020 strong
      Eastern Colorado VA Receives Shipments Of Covid-19 Vaccines
      Fidelity looks to speed vaccinations to get workers back to offices
      OMERS CEO Blake Hutcheson
      OMERS records worst loss since 2008 on bad COVID-19 bets
    • DCALTA releases daily valuation tool for alts in DC plans
      PSCA: Employee participation in non-qualified deferred comp plans rising
      Profile of backlit woman against at TV monitor with female symbols on it
      Women outperform men in managing DC plans – Morningstar
      A  Malaysia flag flies in Putrajaya on Sept. 23, 2020
      Malaysia’s EPF ends 2020 up 7.9% at almost $250 billion
    • TPT Retirement taps into low-carbon strategies
      Gary Gensler
      Nominee Gensler backs SEC climate risk disclosure
      Emissions from a smokestack in Poland
      Asset managers facing more scrutiny on ESG issues – report
      Boris Johnson, U.K. prime minister, hosts the U.N. Security Council's virtual meeting on climate change risks in London on Feb. 23, 2021
      Progress in fighting climate change falls short – U.N.
    • Donation illustration
      Jefferies will use trading commissions to do good
      Michael Arougheti
      SPACs ride wave as latest investment darling
      Spirit winners
      Prudential honors young people who are helping out
      2 U.K. pension execs take on ESG investing in new podcast
    • Robert 'Rob' Shafir listens during a Senate Permanent Subcommittee on Investigations hearing in Washington on Feb. 26, 2014
      Sculptor hedge fund hits sixth straight year of outflows
      The WallStreetBets forum on the Reddit Inc. website on a laptop computer and the GameStop logo on a smartphone in an arranged photo.
      GameStop frenzy has hedge fund managers rethinking next moves
      Gabe Plotkin, chief investment officer and portfolio manager of Melvin Capital Management, speaks during the Sohn Investment Conference in New York on May 6, 2019
      Citadel, Point72 back Melvin with $2.75 billion after losses
      Shanghai skyline
      Global hedge funds struggle even in a more open China market
    • University of West Florida Foundation assigns $5 million to private credit
      Pontiac General Employees drives $5 million into real estate
      TPT Retirement taps into low-carbon strategies
      Gary Gensler
      Nominee Gensler backs SEC climate risk disclosure
    • Fidelity registers 17.9% rise in AUA in 2020
      Mellody Hobson
      Ariel’s Mellody Hobson hitting her stride as co-CEO
      Adrian Lee & Partners appoints head of sales and marketing
      Jackson Square Partners out as Vanguard subviser
    • Funded status of largest U.S. pension plans climbs in 2020
      Corporate plan funding ratios get a boost in February – 2 reports
      Silentnight owners settle pension fund dispute with regulator
      A  copy of the Daily Mirror newspaper is removed from the production line at Trinity Mirror's factory in Watford, U.K., on April 13, 2010
      Media group Reach inks buy-in deal for pension fund
    • Adrian Lee & Partners appoints head of sales and marketing
      BlackRock Investment Institute picks global chief investment strategist
      Metlife Investment Management selects new head of real estate equity
      Eric Lane departs Goldman for Tiger Global
    • The Charging Bull statue is covered in snow near the New York Stock Exchange on Feb. 11, 2021
      Bain: Private equity managers finish 2020 strong
      Carlyle secures $4.1 billion ESG-related credit facility
      Hamilton Lane raises $3.9 billion for fifth secondary fund
      PSG closes first Europe-focused fund at $1.5 billion
    • AEW chooses head of fund operations and debt finance
      Sebastiano Ferrante and Jocelyn de Verdelon
      PGIM Real Estate turns to staff to fill new roles
      European managers key in on specialist strategies
      Ingrid Jacobs
      Jones Lang LaSalle brings on head of diversity and inclusion
    • Retirement cartoon
      Hopes rising for retirement readiness in 2021
      Neal and Brady
      Retirement security could be only issue both sides accept
      Shawn O'Brien
      Annuities coming to target-date funds, but not right away
      David Ireland
      Sponsors returning to questions about in-plan annuities
    • Charging Bull, sometimes referred to as the Wall Street Bull or the Bowling Green Bull, a bronze sculpture that stands on Broadway just north of Bowling Green in the Financial District of New York City
      Top-performing managers Q4 2020
      P&I 1,000 largest retirement plans: 2021
      Retirement in emerging markets
      Outlook 2021
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • University of West Florida Foundation assigns $5 million to private credit
      Pontiac General Employees drives $5 million into real estate
      Minnesota taps Albourne as first private markets consultant
      LGPS Central seeks managers for targeted return strategy
    • University of West Florida Foundation assigns $5 million to private credit
      Pontiac General Employees drives $5 million into real estate
      Minnesota taps Albourne as first private markets consultant
      LGPS Central seeks managers for targeted return strategy
    • Financial Auditing Services
      Actuarial Services
      Emerging Market Equity Manager Services
      Securitized Credit Manager Search
    • Taiwan Semiconductor’s No. 1 in the emerging markets book
      U.S. fixed-income returns post another positive year
      Nasdaq delivers an impressive year
      U.S. dollar's recent decline continues
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • Tesla cartoon
      Don’t confuse wealth creation with retirement saving
      Top 1000 cartoon
      Top 1,000 retirement plans weather storm just fine
      Infrastructure cartoon
      You must go big on infrastructure, Mr. President
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
    • Investment Trends: Looking Ahead Across Equity Sectors
      Rethinking Market and Reference Data Management
      China is embarking on a new stage of growth
      Gold Outlook 2021
    • Sameer Shalaby
      Commentary: Why should investors care about treasury management?
      David Blitzstein
      Commentary: Without a national retirement policy, Americans face a future of pension crises
      Lawrence Cunningham
      Commentary: Gensler should keep Clayton’s pragmatic proxy adviser rules
      My-Linh Ngo
      Commentary: Pension funds and the role of the debt market in the fight against climate change
    • Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
      Focus on manager diversity pushes asset owners’ to walk the talk
    • P&I Content Solutions
      How will gold react?
      To people shaking hands
      P&I Content Solutions
      Lessons From 2020: Today’s OCIO Model Passes a Major Test of Governance
      Sponsored Content By MassMutual
      Leveraging Data to Manage Risk
      Sponsored Content By iShares
      ETFs are becoming a cornerstone of insurance equity portfolios
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • watch video
      0:45
      Private funds weathered 2020 turmoil
      watch video
      0:59
      Secure choice and other retirement plans at a state level
      watch video
      3:33
      P&I 1,000 by the numbers 2021
      watch video
      1:33
      A look at hiring activity in 2020
    • Emerging Markets: Expanding Investors’ View
      2021: A Fixed Income Odyssey
      Technology is the New Oil: The Changing Nature of Emerging Markets
      Powering the Change: The power of diversity and inclusion
    • POLL: Working after the pandemic
      POLL: The year ahead for the 1,000 largest U.S. retirement funds
      POLL: The Biden administration’s economic plans
      POLL: Retirement issues in 2021
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • By the Numbers for February 2021
      Top performing managers by category: commingled accounts, 4th Quarter 2020
      Top Performing Managers of Domestic Blend Equity, 4th Quarter 2020
      Top Performing Managers of Domestic Intermediate-Duration Fixed Income, 4th Quarter 2020
  • Events
    • Conferences
    • Webinars
    • Defined Contribution Spring Virtual Series
      DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • Emerging Markets: Expanding Investors’ View
      2021: A Fixed Income Odyssey
      Technology is the New Oil: The Changing Nature of Emerging Markets
      Powering the Change: The power of diversity and inclusion
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. MONEY MANAGEMENT
September 30, 2013 01:00 AM

Knowledge management underutilized by money managers

Yet Oxford/P&I survey finds concept may create more stable business model

  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Money managers are hard-pressed to apply knowledge management, despite professing its importance in an era of intense competition and difficult market conditions, a survey sponsored by Pensions & Investments and the University of Oxford shows.

    “Most respondents believe themselves to be more familiar with the concept of knowledge management compared to their organization,” said Gordon Clark, director of the Smith School of Enterprise and the Environment, Oxford University, Oxford, England. “When you broaden that question to the asset management industry, the majority (of those surveyed) believes that the industry isn't really familiar with it at all, suggesting that while there are certain asset managers who are good at it, the overall industry is probably not taking (knowledge management) seriously enough.”

    Knowledge management is defined loosely as the systematic process of identifying, creating and sharing intellectual capital within a firm to gain a competitive advantage.

    Implementing a knowledge management system could achieve a more stable business model for firms that don't yet have a process in place, according to 56% of respondents to the survey.

    “Asset management is a knowledge industry; that's what drives us,” said Eduard van Gelderen, chief investment officer of capital markets investments at APG Asset Management, Amsterdam. Mr. Gelderen has conducted academic research on the topic and was involved in the drafting and analysis of the P&I/Oxford survey as part of his doctoral research at the International School of Management in Paris.

    Mr. van Gelderen said money managers, pension funds and consultants should be asking, “How can I combine all the different parts in my organization in the best way possible way to generate the best performance? It sounds simple, but in practice, it's a very tough job.”

    For organizations that already have launched a knowledge management system, the initiative does contribute to a more stable business model, according to 66% of the respondents. While a majority of the respondents overwhelmingly said knowledge management is familiar to them individually, the concept is not well understood by the industry in general.

    Memory system

    The concept of knowledge management can be compared to an organizational memory system — “the better organized and indexed it becomes, the more enhanced is the organization's ability to use its past to improve its future,” said Dane Rook, doctoral researcher at Oxford University and a co-author of the survey. “But if (the organization) has amnesia or an overly selective memory system, we can see this as a clear impediment to improvement.”

    Applied to institutional investing, a knowledge management framework should “link all the elements (of the investment process) closely together,” said Mr. van Gelderen, who is also a member of the board of APG, Europe's largest money manager with €334 billion ($452 billion). APG is owned by the €292 billion Stichting Pensioenfonds ABP, Heerlen, Netherlands.

    At APG, the practical application of knowledge management involves “finding the right strategy for pension funds, figuring out where to take active bets and to what extent. The next step involves determining whether managers have the right skill set and infrastructure to implement those strategies,” Mr. van Gelderen said.

    Such an approach leads to some turnover in the external money manager lineup, he added.

    For money managers, the first requirement is a deep understanding of what drives markets and of market structures. “Does an organization know what it knows? That is the first step,” Mr. van Gelderen said. “Only then can it effectively create new knowledge.”

    Some organizations have launched divisions with the sole purpose of generating and aggregating ideas, as well as distributing them within the firm and beyond. Sources pointed to the BlackRock Investment Institute as an example.

    “Before the institute, we had good sharing, but if we wanted it to happen all the time, we had to be purposeful about it,” said Lee S. Kempler, managing director at BlackRock in New York and executive director of its investment institute.

    “The goal is to make the sharing of market insight happen more systematically.”

    Formal process needed

    Mr. Kempler added that a firm as large as BlackRock needed to have a formal system.

    “The single greatest trigger for needing to be more formal about this (process) is size. A smaller firm can be pretty informal — a small group of managers who know each other can get together at one table and discuss things. But when you get to the point where not all the partners know each other, you need to set up a more formal knowledge sharing system,” he said.

    Another firm using knowledge management is Towers Watson & Co.'s Thinking Ahead Group, eight people who don't have day-to-day client consulting responsibilities and are encouraged “to challenge the conventional wisdom,” said Chris Ford, head of investments for Europe, Middle East and Africa at Towers Watson, Reigate, England. (He is not in the group.)

    “We deliberately chose a diverse group of people,” Mr. Ford said. “If you want people to think independently, you have to have the framework that encourages that.”

    Knowledge of the investment strategy, which has nothing to do with predicting the future but an understanding of where the arbitrage opportunities are, is another important factor, Mr. van Gelderen said. “The manager should be able to combine everything in best way possible, from the people they hire to the infrastructure, and connect all the dots in order to make (the investment strategy) work,” he added.

    David Kabiller, co-founder and head of client strategies at AQR Capital Management, Greenwich, Conn., said, “Using knowledge management to generate performance edge is in the DNA and culture of the firm.”

    Key elements of the company's knowledge management system include “breaking down silos so that innovative ideas don't lie dead in a corner within a certain silo somewhere” and emphasizing “a culture of great debate internally and externally to avoid group thinking,” Mr. Kabiller said.

    Compensation is also tied to idea generation and innovation, as well as the ability to distribute and engage others with their work. At AQR, knowledge management “is in the messaging; it is discussed in reviews and influences who makes partner,” he added. AQR had $83.7 billion in assets under management as of June 30.

    About 74% of the respondents to the P&I and Oxford survey see knowledge management as “always important” to their organization, according to the 243 respondents of the survey, conducted online between Aug. 19 and Sept. 9.

    Half of the respondents said knowledge management is most meaningful in portfolio construction, followed by innovation or idea generation. Some also mentioned risk management and strategy execution as activities in which knowledge management proved useful.

    “Knowledge management within an organization has become a more important part of the investment process, particularly in a world increasingly subject to risk and uncertainty,” said Mr. Clark.

    “One of the common threads across successful managers is that they practice critical thinking skills across all aspects of the firm,” Mr. Rook noted, mentioning Bridgewater Associates LP, where “the idea of self-reflection is built in.”

    According to the results of the survey, when generating beta returns, explicit knowledge — which is generally defined as knowledge that can be codified and distributed — is generally viewed as more important than tacit knowledge, which is knowledge that's particular to an individual, and difficult to codify. However, when generating alpha, tacit knowledge is more important, respondents said.

    “On the one hand, asset managers claim that knowledge management is very important,” Mr. van Gelderen added. “On the other hand, if you really look at the reality, a coherent knowledge management system is actually extremely limited (in asset management). Many struggle to put it into practice consistently across the company.”

    Key element

    A key element in a sound knowledge management system is ensuring that mistakes are not repeated. At Research Affiliates Inc., which had $149 billion in assets linked to its strategies as of June 30, part of the firm's knowledge management process includes post-mortem analysis on any error, combined with routine checks on inconsistencies in the investment models, said Katrina Sherrerd, chief operating officer at the firm in Newport Beach, Calif.

    Barriers that prevent companies from maximizing their knowledge management systems are often structural, such as costs related to investment technology, sources said. But there are other barriers: According to the survey, 36% said the biggest hurdle is the tendency for portfolio managers to protect their knowledge in order to gain a competitive edge.

    This is “a classic question when it comes to knowledge management in the asset management industry,” Mr. Clark said.

    “It goes to the tendency for star performers to want to protect their knowledge from everyone else, yet it's this knowledge that might benefit the company as a whole and even those star managers themselves. Barriers for sharing knowledge harm the whole organization.”

    Another 37% said compensation structures are not conducive to knowledge sharing. At the same time, 74% believe “collective knowledge of investment teams is more critical to generating excess returns than the individual knowledge of a star performer,” according to the survey.


    Reporter James Comtois contributed to this story.

    Related Articles
    Having belief set is the key to future returns
    Managers honing focus on beliefs
    P&I survey shows divergence in investors', market views
    Results from the P&I/University of Oxford knowledge management survey
    Asset owners, managers failing to efficiently use 'knowledge management' — study
    Recommended for You
    Fidelity registers 17.9% rise in AUA in 2020
    Fidelity registers 17.9% rise in AUA in 2020
    Ariel’s Mellody Hobson hitting her stride as co-CEO
    Ariel’s Mellody Hobson hitting her stride as co-CEO
    Adrian Lee & Partners appoints head of sales and marketing
    Lessons From 2020: Today’s OCIO Model Passes a Major Test of Governance
    Sponsored Content: Lessons From 2020: Today’s OCIO Model Passes a Major Test of Governance
    sponsored
    Events
     
     
    Sponsored
    White Papers
    Rethinking Market and Reference Data Management
    Investment Trends: Looking Ahead Across Equity Sectors
    China is embarking on a new stage of growth
    Gold Outlook 2021
    Shifting DC Times - Winter 2021
    GP-LED OPPORTUNITIES AT THE SMALLER END OF THE MARKET
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    pilogo-NEW
    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    150 N. Michigan Ave.
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center