Automate or Delegate Investment Decisions
In recent years, promises of automated investing have multiplied.
- Trading robots
- Investment algorithms
- Robo-advisors
- Managed portfolios
- Discretionary portfolio management
The message is simple:
If investors make mistakes, technology — or experts — will do better.
- Faster
- More disciplined
- More rational
The idea is appealing.
Remove human error.
But in practice, the decision is not removed.
It is delegated.
Delegation Is Not New
In traditional finance, this principle has existed for a long time.
It is called discretionary portfolio management.
The investor defines a framework:
- investment horizon
- risk tolerance
- financial objectives
Then a professional makes the investment decisions on their behalf.
- Purchases
- Sales
- Rebalancing
Technology did not invent this model.
It simply automated it.
Robots, Managers, Algorithms: The Same Logic
Whether it is:
- a trading robot
- a robo-advisor
- a portfolio manager
- a managed allocation within a life insurance policy
- a wealth advisor
the principle is the same.
You no longer choose each investment.
You choose who makes the decisions.
Why Delegation Is Appealing
Delegation responds to a real need.
Financial markets are complex.
Information is abundant.
Time is limited.
Entrusting the management of investments to a professional or to a system can bring:
- expertise
- diversification
- discipline
- time savings
The promise is therefore legitimate.
But it also has a consequence that is often underestimated.
What Disappears… and What Does Not
When investors delegate their investments, some things disappear:
- constant market monitoring
- technical rebalancing
- day-to-day decisions
But one thing never disappears.
Risk.
Delegation does not eliminate risk.
It simply changes how it is managed.
When Risk Becomes Invisible
When investors manage their portfolio themselves, the mechanics are explicit.
They choose:
- the asset
- the exposure
- the timing
When management is delegated, part of the system becomes invisible.
The investor sees:
- a performance figure
- an overall allocation
- periodic reporting
But the internal mechanics remain in the hands of the system.
- What economic assumptions are used?
- What level of leverage is applied?
- How sensitive is the portfolio to market changes?
Performance is visible.
The structure of risk much less so.
When Systems Become Fragile
This dynamic does not concern only individual investors.
It also exists in institutional finance.
A recent example illustrates this.
The Example of British Pension Funds
In 2022, British pension funds experienced a major crisis linked to investment strategies known as LDI (Liability-Driven Investment).
These strategies often used derivatives and sometimes leverage to manage pension liabilities.
LDI strategies are designed to align a pension fund’s assets with its long-term obligations, helping to stabilize funding levels despite changes in interest rates or inflation.
When interest rates rose sharply, these structures triggered large margin calls.
Funds were forced to sell large quantities of government bonds to raise liquidity, amplifying the fall in prices.
The situation became serious enough that the Bank of England intervened to stabilize the bond market.
The problem did not come only from the markets.
It also came from the complexity of the management systems to which risk had been delegated.
Delegation Does Not Remove Uncertainty
A robot can apply a model.
A manager can follow a strategy.
A system can optimize an allocation.
But markets remain:
- uncertain
- cyclical
- adaptive
Models work under certain conditions.
Markets change.
When the environment evolves, the assumptions of the system may become fragile.
And the question reappears:
Do we truly understand the system to which we have entrusted our capital?
Emotion Does Not Disappear
Delegation often promises to reduce emotional biases.
This is partly true.
A robot does not feel fear.
A manager follows a method.
But the investor still watches the performance.
They see:
- losses
- fluctuations
- difficult periods
And they are the one who decides whether to continue.
Delegation does not remove emotion.
It simply changes when it appears.
Automate… What Exactly?
There are two very different forms of automation.
Automating execution:
- investing regularly
- rebalancing a portfolio
- applying a predefined allocation
This can simplify investing.
Automating decisions:
- constantly rebalancing exposures
- predicting markets
- adjusting allocations dynamically
This does not eliminate risk.
It simply shifts responsibility.
The Real Question
The question is not only:
“Who makes the decisions?”
The real question is:
Do you understand the system to which you have entrusted your capital?
Without that understanding, delegation can become fragile.
Portefeuille Serein
Peace of mind does not come from the fact that someone — or something — decides for you.
It comes from understanding:
- the real exposure
- the accepted risk
- the possible scenarios
A robot may drive.
A manager may steer.
But you are still the one sitting in the car.
Because managing emotions does not mean eliminating them.
Emotions often appear when the investor no longer understands what is happening.
Understanding your system is often the best way to master them.
That is precisely the goal of Portefeuille Serein.
- Learn to understand.
- Learn to structure.
- Learn to build a simple, coherent and sustainable investment system.
Not to do everything yourself.
But to know what you are doing — and why you are doing it.
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