Strategic capital investments in asset management: a value-based approach

Abstract

Purpose Value constitutes a key principle of asset management (AM) and decision-making processes should be oriented toward optimizing it. Value models refer to models that can measure the effects of any decision over value, supporting decision-making concerning the assets through their whole lifecycle. In this context, the objective of this work is to develop a methodology for establishing value models to support decision-making in strategic capital investments for multi-category portfolios. Design/methodology/approach An approach that integrates multi-criteria decision-making, AM principles and participatory processes is proposed. Findings The analytic hierarchy process and multi-attribute utility methods are used as analytical tools enabling the assignment of absolute merits to the evaluated alternatives. The application of the AM principles allows one to frame the decision problem within the context of AM. Furthermore, participatory processes enhance transparency and trust in the developed value model and empower employees. Practical implications Through the application of a case study, it has been demonstrated that the approach not only facilitates the ranking of alternatives and a better understanding of their strengths and weaknesses but also establishes a shared concept of objectives (and attributes for their assessment) within the company for the capital investment decision-making. Originality/value The AM literature often lacks systematic approaches for identifying value and making value-based decisions. While some approaches have been proposed for guiding strategic capital investments, they typically rely solely on financial and risk criteria. This work aims to bridge this gap by integrating various dimensions of value into the development of a comprehensive value model.