Spanish fund house Mapfre Asset Management has launched a fund that aims to exploit pricing inefficiencies in European equities caused by the behaviour of market participants.

MAPFRE Insurance company

Managers at Mapfre identified a set of circumstances in which certain cognitive biases have a tendency to make stock prices deviate significantly from their intrinsic value, offering a margin of security to invest cost-effectively, and at lower risk, over the long term. The process will be supported and overseen by an advisory board composed of recognised experts in the field of the behavioural economics.

Fund Manager Luis García believes “Understanding why market participants behave as they do is an important aspect of asset management and a great tool for those that follow a value investment philosophy,”

The companies proprietary methodology  will enable it to identifying opportunities caused by investors reacting to new information in irrational and often exaggerated ways, which managers will then analyse to determine whether these opportunities represent attractive long-term investments.

By Greg Copeland

Behavioural Strategist