Patience vs Dynamism
The praying mantis is a master of patience and precision. It waits in stillness, observing its surroundings with acute attention, and strikes at the precise moment to secure its prey.
This remarkable insect, known for its calculated approach to hunting, offers insightful parallels to the world of institutional investing, where the rapid pace of transactions and the pursuit of immediate gains often dominate the landscape.
Despite being known for its ability to remain motionless for extended periods, the praying mantis is equally adept at dynamically striking its prey at precisely the opportune time – an illustration of its ability to seamlessly toggle between long-term and short-term tactical manoeuvres.
Long-term Investing Misunderstood?
A competitive edge that asset owners – pension, sovereign and insurance funds – have over other financial institutions is patient capital, which in most cases, is analogous to long-term investing.
However long-term investing is often naively framed in time horizons or holding periods.
According to research by Australian National University associate professor Geoff Warren, long-term investors should primarily be concerned with long-term outcomes, plus consider the many facets of investing for the long haul that extends beyond the investment approach.
Embracing an objective-driven definition allows the asset owner to develop a comprehensive framework, which includes:
- Policy and governance
- Strategic and dynamic asset allocation of capital
- Risk management, including climate, geopolitics etc
- Portfolio implementation, asset class approaches and access
Innovation & Technology
The praying mantis is renowned for its exceptional vision, capable of detecting even the slightest movements around it. Its unique predatory techniques remind us of the value of innovation in institutional investing.
Much like the mantis employing distinctive hunting tactics, institutional investors can benefit from innovative approaches such as embracing technology and harnessing data analytics to analyse market dynamics and identify idiosyncratic opportunities.
Connectivity & Complexity
However, much like any metaphor, the comparison is not without its nuances. While the praying mantis is a solitary predator, institutional investors operate within a complex network of financial institutions, regulatory bodies and global markets.
The interplay of geopolitics, deglobalisation, supply chain disruptions, regulatory interventions, technological advances have resulted in an environment that is uncertain and volatile.
Investment decision-making in such complex environments is inevitably challenging. How can alpha be sustainably harvested? What does diversification or being defensive mean?
Essence of Portfolio Construction
The parallel between the mantis’ patient yet dynamic approach to hunting and the deliberative nature of institutional investing invites us to reflect on the importance of patience, risk management, diversification, innovation and adaptability.
We look forward to addressing these issues and implications for portfolio construction at the 10th annual Global Investment Strategy Forum in Singapore.Enquire about this event