Investors continue directing vast sums to active equity products to further diversify their portfolios and attempt to generate excess returns, commonly referred to as alpha.
Identifying actively managed equity products that can deliver alpha is challenging. Success involves blending professional judgment, rigorous analysis, and periodic integration of novel data sets that can help identify sources of outperformance.
To source untapped alpha, the study of human capital and how businesses unleash the full potential of their workforces is behind the formation of a new metric known as the Human Capital Factor. This new factor computes how effectively a company’s culture harnesses the motivation and creativity of its employees.
In a recent 45-minute webcast, industry thought leaders Dan Ariely, Khuram Chaudhry, and Michael Ervolini discussed the details of this new metric and some key research findings. For example, higher compensation levels did not correlate with higher Human Capital Factor values. Rather, the drivers tend to be job elements that foster intrinsic motivation (e.g., a clear role and career path forward, feeling respected and valued, a sense of autonomy, a boss that listens and takes ideas seriously). Yet, most companies spend a great deal of time reengineering their compensation systems when they might be better off learning how to strengthen the motivation of their employees.
To learn more about the Human Capital Factor, how it correlates to outperformance, and the benefits it presents to asset owners, download the full webcast.
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