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Acting irrationally to boost US fund

JP Morgan Fleming Asset Management believes an understanding of behavioural finance is key to outperforming the US market.

JPMF says the S&P 500 index is notoriously difficult to beat and the average fund in the North American sector has fallen by 4.1 per cent over one year. However, the JPMF US fund is down by only 0.8 per cent, ranking it ninth out of 83 peers.

JPMF changed the process underpinning management of its fund to a behavioural finance-based system in May 2003, since when it has gone up 12 places in the rankings.

US fund manager Silvio Tarca says behavioural finance theory is based on the fact that investors act irrationally since their investment decisions are influenced by fear, uncertainty, bias and ego, which creates market inefficiencies.

Laurence Milbrook senior partner Frank Dolan says: “It is very interesting to see somebody running a fund on the basis of people being irrational, which I would say is nearer to the truth. The performance of North American funds has been very strange and while America is often a leader of the market, it is not always predictable.”


One supermarket could check out

Old Mutual would be unlikely to keep two fund supermarkets if it buys Skandia, says Financial Technology Research Centre director Ian McKenna.

Schroders Head of Investment to Leave

Schroders head of investment Richard Horlick has decided to step down from the board as of May 25th, and will leave the company later this year. Former Schroders group chief investment officer and vice chairman of State Street Global Advisors Alan Brown will join the board and assume Horlicks responsibilities on July 5, 2005. Brown […]

Spelling out

The Government is being called on to publish the full pension simplification rules and end the uncertainty that is stifling planning by the industry, says Xansa head of financial services James Doyle.

Nothing NU about admin standards

My last words to one of our clients as I left a recent meeting were: “Now don’t forget, Mr Client, we chose Norwich Union for the commercial property investment part of your portfolio because of the fund’s strength and performance. Please remember that Norwich Union’s administration is usually appalling and we can expect them to lose your cheque/application at least once, ha, ha.”


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