CFA Institute
October 15, 2018
Shaping the investment industry for the greater good.

Investment Firm of the Future: Investment Model Shifts

This research takes a structured approach to analyzing the future by identifying investment firm shifts that the industry may need to accomplish collective goals.

Investment Firm Shifts : Refocus investment processes on outcomes

The control and delivery of client outcomes is a critical new focus—hence the growing emphasis on investment solutions, which are by design aligned to outcomes and so have natural advantages.

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The investment firm of the future will:

Achieve organizational coherence
Firms need to adopt stronger investment practices tied to the disciplines of beliefs, frameworks, processes, and measurement. The need to integrate more elements in the investment model is critical. There are potentially four dimensions to this greater “joining up”: short- and long-term, financial and extra-financial, allocation and ownership, and return and impact.

Strengthen investment models
On top of the greater sophistication needed in integrated management, there are other needs. At the top level, this is the need for a better investment model in which leading-edge designs are combined with better analysis. At a more detailed level, we should see better design and use of investment solutions with appropriate alignment to desired outcomes.

Require more precision to achieve client outcomes
Managing to outcomes involves a more complex investment challenge in successfully integrating the different risk and return premia, in particular making market exposures less dominant.

Build stronger investment culture
An investment culture is required that emphasizes investment skill as a craft and a passion and also includes a purpose-driven calling and mindset.

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