We spoke with Dariusz Felk, a portfolio risk analyst at a mid-sized Canadian asset management firm, about patterns he sees repeatedly in business investment committees.
Where the data points
Felk references a 2023 Morningstar study showing that investor returns trail fund returns by an average of 1.7 percentage points annually. That gap is not explained by fees. It is explained by timing decisions made under emotional pressure.
When asked what triggers these decisions in business settings, Felk is direct.
Panic selling after a single bad quarter is the most common pattern. A board sees a 12% drawdown and interprets it as a structural failure rather than normal variance. They exit positions at the worst possible moment.
The committee problem
Group decision-making does not reduce emotional bias. Felk notes that in committee structures, loss aversion tends to amplify rather than cancel out. Each member reinforces the anxiety of others, and the group converges on the most defensive option available.
He points to a 2022 CFA Institute report where 61% of institutional investors admitted that short-term market volatility influenced decisions that were supposed to be governed by a long-term mandate.
A practical checkpoint
Felk recommends one concrete step: before any portfolio adjustment, require a written comparison of current conditions against the original investment thesis. If the thesis has not changed, the adjustment needs a separate justification. Most of the time, none exists.