Your Investment Team Has a Problem You’re Not Measuring

And it’s costing you more than any bad trade.

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You measure everything. Returns, attribution, risk-adjusted performance, factor

exposures, tracking error. You have dashboards for your dashboards. If something

moves in the portfolio, you know about it.

But here’s what you’re not measuring: how your team actually works together. Whether

the junior analyst speaks up when they see something the PM doesn’t. Whether

feedback flows in every direction or only from the top down. Whether your investment

team meetings produce genuine debate or just efficient agreement. Whether the culture

your team experiences is the culture you think you’ve built.

In 29 years inside investment firms, I watched these unmeasured dynamics cost more

than any single bad investment. Not all at once. Slowly. The way a position drifts when

nobody’s watching.

The patterns that destroy returns from the inside

The most talented investment teams I worked with sometimes produced mediocre

results. And the reason was almost never a lack of skill. It was a set of behavioral

patterns that nobody was examining.

A PM holds a losing position for two years. Not because they’re stupid. Because

admitting they were wrong feels worse than taking the loss. The information was there

the whole time. They’d just stopped looking at the pieces that didn’t fit their story.

A team sits through an investment pitch and nobody asks the hard question. Not

because they agree. Because the room doesn’t feel like a place where challenge is

welcome. So the contrarian data point gets explained away. The junior analyst who sees

the flaw in the model stays quiet. Nobody pushes each other to get closer to the truth.

And the team makes decisions that are efficient but not rigorous.

A firm promotes their best stock picker to team leader and hopes for the best. The skills

that made them a great analyst have nothing to do with the skills they need now.

Nobody trains them for the transition. And then leadership is surprised when the team

doesn’t function.

These aren’t rare events. They’re the daily operating environment of most investment

teams. And they’re invisible until someone creates the conditions to see them.

Why nobody looks

Three reasons.

First, returns mask everything. When performance is strong, nobody questions the

process. A good outcome from a bad process feels like vindication. It’s actually a ticking

time bomb. But it doesn’t show up on any dashboard, so nobody looks.

Second, the industry doesn’t have a language for this. We have elaborate frameworks for

portfolio construction and risk management. We have nothing equivalent for the human

dynamics that determine whether all that work actually produces what it’s capable of. So

the conversation doesn’t happen. Not because people don’t care. Because they don’t

have a way to start it.

Third, most outside help doesn’t help. The coaches have never managed a portfolio. The

consultants bring generic leadership frameworks that don’t speak the language of

investment teams. They ask good questions. They don’t understand the weight of a

losing position at quarter-end or what it feels like to have your judgment evaluated daily

with real money on the line.

What I’ve learned about teams that work

The best investment teams I worked with over 29 years had a few things in common.

None of them were about talent.

The junior person felt safe saying the thing nobody else would. Not comfortable. Safe.

There’s a difference. Comfort means nobody pushes back. Safety means the pushback is

expected, welcomed, and doesn’t carry a career penalty.

Feedback happened in real time, not at year-end. When someone’s process was drifting,

they heard about it the same week. Not in an annual review six months after the damage

was done.

The team studied their wins with the same rigor they studied their losses. They asked

whether a good quarter was good process or good luck. Most teams never ask that

question. It’s the most expensive one they’re not asking.

And leadership was developed deliberately. The transition from analyst to PM was

supported. The move from PM to team leader was coached. People didn’t just get

promoted and left to figure it out. A way to start looking

I built a diagnostic for this. Not a personality assessment. Not a team-building exercise.

A set of 35 questions across five dimensions of how investment teams actually work:

Decision Quality, Candor and Challenge, Leadership and Development, Alignment and

Drift, and Sustainability and Succession.

It’s designed to be used two ways. A team leader can fill it out alone and get a fast,

honest read on where they think things stand. Or the whole team can fill it out

independently and compare. The value in the second approach is in the gaps. The leader

who scores Candor and Challenge at 30 while the junior analyst scores it at 14 has just

learned something no dashboard would ever show them.

The diagnostic includes three exercises you can run this week without any outside help,

and a set of red flags to watch for in your next meeting. It’s a tool, not a pitch. You’ll get

value from it whether you ever talk to me or not.

Investment-Team-Diagnostic.pdf

Download PDF • 303KB

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Rayna Lesser Hannaway, CFA

Founder, Pure Path Ventures

Coach & Trusted Advisor to Investment Professionals