FINANCES | 26.05.2021
“The philosophy of value investing applies to both life and work”
Meanwhile, some funds are endeavoring to escape the noise and seeking to keep the current storm of emotions at bay. This is the case of the MAPFRE AM Behavioral Fund, which in the past 12 months has seen its portfolio revalued by more than 60 percent, surpassing its own benchmark index and achieving double the returns of other funds in its European stock market category.
With data that give cause for optimism for the fund, MAPFRE AM manager, Luis García, attributed these high returns in such a short space of time to its study of psychology and its rigorous investment analysis. In fact, “it is the first fund in Europe to put investor psychology at the center of its investment process.”
García admitted he was very pleased with the results seen in recent months. However, with three years now behind it, the fund’s vision is set firmly on the long-term. “We are pleased for our shareholders, but we are always conscious that in a period as short as 12 months, luck plays a big role in deciding who tops the rankings.”
The fund’s investment philosophy places great value on patience, with Warren Buffett’s approach being one of the fund’s main benchmarks. “People often think that our job as managers involves constantly reacting to the market, but that’s not the case. Rather, it’s the opposite: focusing on study and only taking advantage of market movements when they clearly present a favorable opportunity,” said García.
This line of work is closely related to value investing, a concept that underpins the MAPFRE AM fund: “It’s almost like a philosophy that applies to life as well as work. Setting out to buy something for less than it is worth makes sense right now and always will do.” To achieve this goal, he admits that it is necessary to deviate from the predominant school of thought and, moreover, “to do so with more successes than failures.” “The bad news is that our brains are not prepared for that, and taking positions that are contrary to the market feels uncomfortable.”
Sports: that “great forgotten” investment area
In García’s words, “what value investors have in common is their dedication to analysis, the entrepreneurial approach to investment and a long-term view that helps escape the noise.” On this basis, every value investor chooses the type of companies they feel most comfortable with. “After years of training, valuing a company within a reasonable price range becomes relatively simple. The real difficulty lies in not letting the outside noise influence your analysis,” he added.
In the case of the MAPFRE AM Behavioral Fund, the fundamental analysis and accounting of each company is very important, though García points out that an even more relevant factor in the fund’s investment decisions is behavioral economics, based on “psychology and exercising control over our emotions.”
In that regard, the expert points to sports as “the great forgotten” area of the investment world: “This fund is the closest out there to a sports thematic fund.” Getting to the heart of the matter, the fund devotes around 10 percent of its portfolio to soccer teams such as Borussia Dortmund (home to striker Erling Haaland), Ajax Amsterdam and Olympique Lyonnais — clubs that enjoy “good business, healthy balance sheets with little or no debt and have managers who allocate capital efficiently.”
Though soccer has a significant weighting within the fund, it is not the only sport that features. Companies linked to the sporting world make up 25 percent of the portfolio’s exposure to this sector. In this respect, García highlighted that there is no “other sector with such positive trends at the moment and with such little representation in the financial world.”
Moreover, he clarified that the fund is also investing in other opportunities, “giving particular weight to companies in the consumer, industrial and technology sectors.” However, the fund’s recent tendency has been to reduce its exposure to some technology companies “that had performed very well” and to increase its exposure to other securities such as CIE Automotive and even Erling Haaland’s side in Germany. Despite all this, García insists that the fund has made very small movements and stresses that it will continue to adopt a long-term view.