Strategic thinking: the core of investment decision-making in Fund-of-Fund (FoF)

Abstract

This study investigates FoF managers’ investment decision-making process and the most important fund/fund manager attributes perceived by FoF managers. We find that FoF managers apply strategic thinking and actively seek out fund managers who also possess strategic thinking competencies. Our findings show that the determinants of fund performance identified in the existing literature (e.g. fund age and education background) play a complementary role at fund-level investment decision, whereas selecting fund managers with strategic thinking competencies (e.g. accumulated working experience, individual cognitive ability, personality, core value and personal beliefs) dominates the qualitative criteria in FoF managers’ thought processes. This study provides new empirical evidence from FoF managers, which sheds light on the challenges FoF managers face in the fund-level investment decisions. The comprehensive thematic framework of this study contributes to the investment decision-making literature and the findings of the study will be useful to practitioners while making investment decisions.