The move demonstrates how an academic discipline has entered the mainstream investment field.

California-based PIMCO, the renowned fixed-income management firm with $1.76 trillion of assets (as at 31 March), has named Nobel Prize winning economist, Dr Richard Thaler, as senior advisor on retirement and behavioural economics. 

The appointment of Dr Thaler highlights how behavioural economics has broken out of academia and into mainstream business and finance. The subject focuses on how psychological, cognitive, emotional, cultural and social factors affect the economic decisions of people and institutions. Applied to finance, it helps describe how markets can be pulled about in ways that are at odds with more “rational” models of human conduct.

Dr Thaler is the Charles R Walgreen Distinguished Service Professor of Behavioral Science and Economics at the University of Chicago Booth School of Business. He was awarded the Nobel Prize in Economic Sciences in 2017; he he is also a co-founder and partner at Fuller & Thaler Asset Management, which uses behavioural finance to manage portfolios of small-cap US equities. 

The firm said that Dr Thaler’s role is to help understand human behaviour and how it affects decision making more comprehesively, such as saving and spending in retirement. As populations age, there is a need for investments to be more finely tuned to handle changing liabilities and saving patterns.

PIMCO recently unveiled it is partnering with the Center for Decision Research at the University of Chicago Booth School of Business.