What kind of attributes other than returns might be important to you? What sort of return trade-off are you willing to live with to have your preferences expressed? And how can we as an industry reliably quantify these trade-offs to help you make an informed decision? The industry narrative is largely unchanged since I joined in the early 2000s. We compete on performance and frame success as our ability to outperform our benchmarks and our peers. The industry attracts individuals who like to win, and we have convinced ourselves that since clients only have the investment assets in their accounts at the end of the day (or calendar year), investment returns should be almost all that matters. But is this narrative sufficient for our clients and for the challenges of the 21st century? More pointedly, are risk and return (or variations thereof) still the only way to play the game? Unsurprisingly, it has taken new (younger) entrants into our industry, and younger clients as well as more intentional regulation, to start to think differently. What kinds of preferences might clients have, outside of risk and return? And how should those of us who have grown up with just a hammer (read: mean-variance optimisation) not just keep looking for a nail (read: efficient frontier)? Perhaps our starting point should be some humility. As an industry we have been quick to claim that a diminished opportunity set driven by client preference will typically result in a return trade-off relative to a market-capitalisation index, while those driven by manager preferences will not. Take the inherent industry scepticism that exclusions driven by religious conviction or green activism could deliver competitive returns against market capitalisation indices, but those driven by an active manager (value or quality) would not. Both arguably are equally ill-suited to beating the MSCI AC world index consistently. Every investment debate becomes a debate about excess return. Every portfolio decision becomes a question of benchmark-relative performance. But clients may care about other things too. What then is driving these belief systems — both with our clients and ourselves? Is there really a fundamental difference when a client expresses a preference to exclude fossil fuel companies, given stranded asset risk, and a value manager excludes growth companies, given margin of safety risk? Why can’t both be legitimate ways of managing money?Of course, with religious exclusions or even green activism, client preferences are not focused on improving returns, but this does not necessarily mean such mandates’ ability to outperform the market capitalisation benchmark is fatally flawed. Similarly, it is not obvious that the restrictions an active asset manager will deploy (“I avoid overvalued shares”; “I buy shares with improving earnings”) will necessarily lead to outperformance, even if that is what the active asset manager hopes to achieve. This brings me to a broader point. As long as our industry focuses almost exclusively on performance relative to market-capitalisation indices, that is all we will see and value. Every investment debate becomes a debate about excess return. Every portfolio decision becomes a question of benchmark-relative performance. But clients may care about other things too. We readily accept that active managers express preferences through their investment philosophies, yet often treat client preferences as somehow less legitimate. Why? Investors may care about how capital is allocated, the externalities created by the businesses they own, or the values reflected in their portfolios. These outcomes may be harder to measure than investment performance, but that does not make them less real or less valuable to the client. Every investment philosophy expresses preferences and imposes constraints. The uncomfortable truth is that active manager preferences are not obviously more legitimate than client preferences. We have simply built an industry that treats them that way. • Crosoer is chief investment officer at PPS Investments.