Research

Beware fund managers bearing gifts: developments in human capital and investment


After the post-2008 global financial crisis, people are much more interested in knowing more about human capital as a key indicator of future value in firms, which incorporates management quality and leadership. Investors increasingly need to see early warning signs of failure or growth prospects in their investments. For bankers, lending proposals are either accepted or rejected on the basis of set financial ratios, such as debt to equity and loan to valuation. Yet, do these ratios tell the real story of the value which is being created, or destroyed, within a company? Is it dangerous for investors to rely on quantitative measures alone?

As part of an ongoing research study, it has been found that financial information and traditional quantitative analytical tools have not served investors at all well. The focus is changing from a reliance on "lag" indicators of past financial performance, more towards a focus on more contemporary qualitative "lead" indicators.

A full executive summary of the research is now available for you to read below. Do you think that it's dangerous for investors to rely on quantitative measures alone?

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Dear Professor Rowley and Drs O'Donnell and Royal
I have recently read your research article regarding the limitations of quantitative analysis and human capital.

Much of what you wrote rang a very loud bell in relation to my own research which is still only in "white paper" form. Should you be interested I have attached to this comment - an abstract, summary and main paper concerning the integrating of qualitative historical data into a short-term adaptive planning system.

Yours sincerely
Bruce Garvey
Founder & Partner
Strategy Foresight Partnership LLP