Pre-mortems: Taking the emotion out of fund selection

The SLI MyFolio team gives their tips for avoiding the human behavioural hurdles that can lead to imprudent decision-making.

We consistently advocate combining a long-term philosophy to investment in actively managed funds with a focus on distinctive approaches. Our aim is to ensure managers have sufficient scope to differentiate their portfolios from benchmark comparators, and that they are afforded ample time for their perceived skill to be rewarded. Such a method is, however, far simpler to espouse than implement, as there are powerful, hard-wired, human behavioural hurdles that can lead to imprudent decision-making. The problem stems from the fact that a long-term holding period is a collection of sho...