SF2 considers confirmation of manager bias

Elisabeth Reyes
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Sandrine Vincelot-Guiet
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Sandrine Vincelot-Guiet

Emotional biases figured highly when the Société Française des Sélectionneurs de Fonds (SF2 - the organisation seeking to engender standards in fund selection in France) held its second conference on the theme: "Are managers subject to bias?"

Structured around three parts, the event was kicked off by Alexis Bienvenu, member of the SF2 office, who went on to provide a descriptive list of biases, particularly those relevant to finance, including negative triggers such as fear, stress, frustration, anger, impatience, shame, regret, but also positive triggers such as excitement, emulation/competition, ambition, singularization, sharing, relationships.

The listed examples led on to emotional biases, such as overconfidence (or sub-confidence), anxiety about losses, the status quo, cultural dispositions, mimicry; then to cognitive or perceptual biases: anchoring, framing, confirmation, availability, mental accounting, familiarity, mental dissonance, and extrapolation. These are seen to represent the full range of most frequent behavioural biases.

Sandrine Vincelot-Guiet, vice-president of SF2, led the second part of the event, in which she shared key results of behavioural finance specialist James Montier's survey of 300 asset management professionals, to highlight common behavioural biases among fund managers.

Putting one of the survey questions to the event delegates, Vincelot-Guiet elicited that a significant number confirmed that they were victims of confirmation of bias - reflecting the actual survey's finding that some 95% of respondents also thought so. According to the survey, the most common bias is excessive optimism; it is the tendency of people to exaggerate their own abilities.

In the third part of the event, Philippe Sarica, president of SF2, looked to behaviours that hinder the optimal effectiveness of financial professionals.

The first considered was overconfidence - overestimating one's own abilities, underestimating risk, believing that one's knowledge is superior to what it is. This cognitive bias is considered one of the most widespread among humans, and to some extent has enabled humanity to progress and survive since its origins. Other biases considered included attitude towards information and narratives. 

In conclusion, it is felt that financial professionals, and therefore fund managers, are just as likely as anyone else to suffer from behavioural biases, something that raises concerns among the full fund selector community, argued Vincelot-Guiet.

The findings also are seen as important in relation to the goals of SF2, which is described as promoting and safeguarding the specialisms of the fund selector profession, by informing, assisting and contributing to the training of its members across France. More information on SF2 is available at http://sfdeux.fr/.