Sound investing is about having the courage and resilience to coldly re-test one’s thesis on the back of incremental news, again, and again, and again. It requires to keep dispassionate views of the opportunities at hand, even after spending long hours on an investment proposition.
We encourage our teams to work collaboratively and welcome being challenged. Seek contradiction rather than confirmation. Put their views and beliefs at risk.
Sound investing is about learning from past experiences and striving to constantly learn and improve.
This requires discipline, humility, and self-awareness. People are all built with an embedded confirmation bias. We naturally see and hear what goes in our direction - rather than detect the obvious facts that challenge our convictions and beliefs. It takes hard work to change this and can hardly be done on one’s own. That is why we are huge believers in open and honest feedback within our teams, in a climate of trust and respect.
We endeavour to reflect this in our processes, encouraging our teams to work with a systematic methodology that notably includes pre-mortem analysis: ahead of a transaction, try and suppose that the investment has gone awry, and identify the narratives for such failure to see how those could be tackled upfront.
We also strongly believe in post-mortem analysis, addressing questions such as: what did we do well in the investment process? Were there best practices that we can leverage across all teams in the future? What did we miss? What practical improvements can we think of to enhance our investment process going forward?
These methods transpire across all our businesses, from liquid trading to private debt.
Sources of inspiration
Thinking Fast and Slow, by Daniel Kahneman
Black Box Thinking, by Matthew Syed
The Second Bounce of the Ball, by Ronald Cohen