Luis García, manager of the MAPFRE AM Behavioral Fund, a mutual fund based on behavioral economics, explained the fund’s strategy at the “Un café virtual con…” (A virtual coffee with…) meeting held by Citywire Spain. “In contrast to the image of the highly intelligent and rational beings, capable of making the most complex of calculations but totally lacking in emotions, that traditional economics had placed at the center of its research, behavioral economics has shown to be better at explaining how we really behave,” said García.
The fund, launched in the first quarter of last year, is the first in Europe to use behavioral economics, which is a strategy that involves trying to integrate concepts from psychology into economics in order to understand why humans make the decisions we do. In this case, we are talking about investment decisions.
García explained that funds that emerged in the US a few years ago were used as a reference for the launch of this product. These funds were divided into two groups. The first contains quantitative funds, or funds that define parameters with concepts drawn from behavioral economics and automate buying and selling. The second group is based on fundamental analysis of companies. “We are more comfortable with this second group. We think it’s important to have a good understanding of businesses and the management teams behind them. Fundamental analysis and the study of market psychology must go hand in hand,” he adds.
The fund has between 30 and 35 portfolio holdings and has undergone some portfolio adjustments as a result of the pandemic. “We made some adjustments in the first weeks of the pandemic and faced the first market downturns with some liquidity. We were struggling to find good investment ideas at the time and luckily we got in at the right time,” he says. Among these adjustments was the sale of two companies and the purchase of two others. One of them was the technology company Adyen, a Dutch payment processing firm. The other was the Borussia Dortmund soccer team.
García thinks that digital payment methods have a long way to go, “and are a trend that is here to stay, although it’s hard to say who the winner will be.” “I think that, on the whole, technology is still the big winner, and it has been for a long time.” Indeed, the manager of MAPFRE AM recognizes that they have increased the weight of technology, which is his favorite sector, along with the industrial and consumer sectors.
However, it’s the fund’s investment in sports that is most striking, since companies in this sector are already weighted above 20 percent. Here, its investment in three soccer clubs stands out. In addition to Borussia Dortmund, the fund was already invested in AFC Ajax and Olympique Lyonnais. “Sport is the most overlooked of the thematic funds.” We believe that investing in soccer clubs, which we always do cautiously and by making wise choices, is a unique opportunity. All three of our clubs are financially sound, have brilliant management teams and generate recurring cash flow.” It is clear that they have suffered on the stock market during the pandemic but, as García explains, “What we do isn’t sports betting. We invest in the long-term, and we think people are going to start going to stadiums again, albeit slowly, and the positive dynamics of the football industry are still in place.” “We analyze clubs like any other company: we look for good business, a good management team and a healthy balance sheet,” he concludes.