ABN Amro Asset Management is set to launch a Luxembourg fund capitalising on behavioural trends in E...
ABN Amro Asset Management is set to launch a Luxembourg fund capitalising on behavioural trends in European markets.
At the same time the company has launched two alternative investment products, a Europe equity long/short fund and a fund of hedge funds.
Cor Ducker, manager of the Behavioural Finance fund, said: "We have developed an active equity investment style based on the concepts of behavioural finance theory.
"Several important psychological effects have been selected for use in a quantitative setting. Irrational preferences of investors can be measured with variables that signal the outperformance potential."
According to behavioural finance theory, irrational preferences are based on a number of psychological effects. These include optimism bias, overreaction to recent information, underreaction to base-rate information, and overconfidence.
Ducker said: "On a pre-fixed date about 570 European blue chip stocks are investigated by means of an econometric model to discover their potential to deliver outperformance.
"The stocks deemed to have the most outperformance potential for the coming month are candidates for selection. After the model has filtered out the most attractive stocks their 'tradability' is evaluated. Stocks that qualify as both attractive and tradable are included in the portfolio, with a weight relative to their market capitalisation.
"There is a pre-fixed minimum holding period for each stock in the portfolio. After this period, the model is re-run and the stocks no longer deemed to be undervalued are sold to make room for ones that have more outperformance potential."
The two hedge funds will have a very conservative profile, aiming for a low-risk approach at all times.
Joanna Munro, director of ABN Amro Asset Management, said: "These funds will be unleveraged and will aim for steady risk-adjusted returns."
The long/short fund will be handled by portfolio manager Dan Jelicic and will aim to be net neutral in its exposure to European markets.
Munro said: "The fund will use the stock recommendations of our industry analysts in Amsterdam for ideas on both the long and the short side. The aim is to minimise market and sector risk, making stock selection the focus."
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