Oxford Risk: Wealth managers need to focus on behavioural alpha

Oxford Risk: Wealth managers need to focus on behavioural alpha

2 juli 2024

Risicomanagement Vermogensbeheer
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Investors on average lose 3% per year for emotional comfort. Understanding and guiding emotions can boost returns.

‘Wealth managers need to focus on behavioural alpha to help investors avoid the losses they make from poor and emotionally driven financial decisions,’ Oxford Risk reports today. ‘It estimates investors on average lose 3% per year from a combination of holding too much cash and making mistakes with their invested assets. These behaviours deliver emotional comfort but come at the cost of investor returns.

Understanding and guiding the emotions that drive investing decisions can help wealth managers boost returns for clients and deliver behavioural alpha, but the industry needs technology to deliver at scale.’

‘Typical errors include focusing on familiarity and domestic assets from well-known companies, chasing current and popular themes, following star fund managers, focusing on past performance, trading too much, not rebalancing enough to effectively diversify, and focusing on income or yield over total returns.’

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