GMO investor clued up on human beings

Thanks to Phil for passing this along.

“Hi, my name is James Montier, and I’m a value investor. I haven’t bought an expensive stock for 25 years.”

GMO treats its own obsession with value investing with a touch of irony unusual in the fund management world, referring to asset allocation meetings as AA. Mr Montier, a member of that AA team, jokes about the addictive nature of its investment philosophy, but his twin obsession, behavioural finance, prompts him to recognise the greatest pitfall of working in such a focused culture.

“The danger is groupthink,” he says. Members of a group often find it easier to agree with what is being said than challenge it, particularly if led by a strong character such as Jeremy Grantham, GMO’s chief investment strategist.

It is easy to imagine, however, that any group comfortable with including Mr Montier is comfortable with debate. Although not in the least disreputable, the image he projects is far from the norm among fund managers. Turning up in jeans and somewhat ill-shaven to interviews, he initially seems as interested in talking about babies or his favourite iPad app as investment.

That is until he gets onto the topic of behavioural finance, the application of insights from psychology to finance and in particular financial decision-making.

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Related book: The Little Book of Behavioral Investing