Taking the Emotion Out of Investment Decisions

(Bloomberg Opinion) -- How do you use behavioral finance to improve investment results at a firm with $72 billion under management? One way is to restrict your portfolio managers' freedom to make decisions. That's what this week's guest on Masters in Business, Simon Hallett, co-chief investment officer at Harding Loevner LP, decided to do.

The rules he created forced his portfolio managers to stick to a process less subject to emotional decision-making and thus less prone to error. The firm's global equity portfolio has outperformed the MSCI ACWI Index, which includes overseas and domestic companies, annually since its 1989 inception.

Hallett also explains why he bought the Plymouth Argyle Football Club, the League One team he grew up rooting for in his hometown of Plymouth, England. The team still plays at Home Park, the same location it has used since 1901. Buying the team was both a labor of love and “the worst investment anyone could ever make.” He made the purchase as a way to give back to his hometown, renovating the local stadium and improving the surrounding area.

A long list of his favorite books is here; a transcript of our conversation is here.

You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Overcast, Google, Bloomberg and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with Paul Wraith, chief designer for Ford, with responsibility for the design of the re-introduced Bronco sport-utility vehicle.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Barry Ritholtz is a Bloomberg Opinion columnist. He is chairman and chief investment officer of Ritholtz Wealth Management, and was previously chief market strategist at Maxim Group. He is the author of “Bailout Nation.”

©2020 Bloomberg L.P.