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Convergence
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febrero 16, 2021

Culture Quant Framework

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febrero 16, 2021

Culture Quant Framework


Convergence

Culture Quant Framework

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febrero 16, 2021

 
 

Company culture, the shared values and behaviors that define how employees collaborate to create value for the enterprise, remains an enigma in the field of investing. Analysts intuitively understand its influence on investment outcomes and nod knowingly when presented with examples of effective or bad cultures. But measuring culture is a subjective exercise that is open to wide interpretation, even among employees at the same company. Culture has defied quantification at a time when researchers are numerically modeling every factor that has an impact on investment performance.

 
 

In the late 1970s, tangible investments were nearly twice those of intangible investments. Today, intangible investments are roughly one and a half times those of tangible investments. This shift has transformed the nature of business.

We believe our economy’s transformation from tangible to intangible assets is secular and early in its course. As a result, investors will increasingly recognize culture as a critical determinant of value creation. That means it will be the subject of critical analysis and measurement in years to come.

Given this reality, we reviewed legacy frameworks to quantify culture and found them to be well intentioned but generally inconsistent. They were also far too broad in their scope. We believe a new approach can add value. We studied how KPIs have evolved, how they are used, and what impact they have had. Our goal is to simplify the complex topic and to create a standard set of tools that investors can use to evaluate a company’s intangible assets.

We have identified employee retention as a significant indicator of culture.

Click on the PDF to learn about our quantitative approach to measuring culture and the framework we developed.

 
 
 
Counterpoint Global seeks to make long-term investments in unique companies whose market value can increase significantly for underlying fundamental reasons. Their portfolios are typically concentrated and differentiated from their benchmarks. Counterpoint Global consists of 36 people, including 19 investment professionals and two disruptive change researchers. The team’s culture fosters collaboration, creativity, continued development, and differentiated thinking.
 
 
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The views and opinions are those of the author as of the date of publication and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. The views expressed do not reflect the opinions of all investment personnel at Morgan Stanley Investment Management (MSIM) or the views of the firm as a whole, and may not be reflected in all the strategies and products that the Firm offers.

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