An ASIC report notes the boom in demand for this asset, saying it heightens the need for “better-quality data” about the size of this sector where estimates range between $1.8 billion and $188 billion.
CPA Australia has weighed into the debate about the cost to oversee the industry, adding its voice to those who argue the fee structure favours the larger funds.
Texas pension fund considers psych tests on managers
(pictured: Christopher Schelling)
A big US pension fund is investigating the use of personality and aptitude tests for fund managers to become part of its due diligence process. The fund’s head of private equity investments, Christopher Schelling, has written a paper explaining the rationale.
Schelling, the director of private equity at the Texas Municipal Retirement System, had the paper published on Asset International’s daily ‘CIO’ newsletter late last month.
He says that the three ‘I’s – Intelligence, Integrity and Intensity – which he terms 3i”, are the most important character traits in a fund manager.
He says: “Numerous private-sector firms have long utilized such tests for direct hiring decisions, as have many government agencies for certain types of critical contractors. “Since hiring managers is really all about hiring people, the parallels are obvious. Psychometric tests are far from perfect, but have been shown to be reasonably accurate. And in addition to scoring cognitive ability and measuring select personality traits, they often test for internal consistency and can highlight individuals engaging in self-promotion and potential prevarication.
“At the very least, tests provide hard data and a means to objectively quantify inputs in an otherwise purely subjective and qualitative process.
“For me, that process is identifying managers who are high 3i. The biggest hurdle will be adoption by prospective managers, particularly the ones that are access-constrained.”
