After three years, MAPFRE’s fund that invests in soccer shows a return of more than 35%

The field of behavioral economics is focused on the study of how psychological, social, and cognitive factors can affect the financial decisions made by individuals. This is the philosophy underlying the strategy applied to the MAPFRE AM Behavioral Fund, where the goal is to understand the impact of such factors on investment decisions. Another unique feature of this fund is that a portion of its portfolio is dedicated to sports teams, specifically three European soccer clubs: Olympique Lyonnais in France, AFC Ajax in the Netherlands, and Borussia Dortmund in Germany. This European equities fund has now been in existence for three years with annualized returns of more than 10% during that period, exceeding its benchmark index by a substantial margin. The fund’s manager, Luis García, explained some of the key factors behind its success.

What is your assessment of the fund’s strong performance over the past three years?

Of course, we are very happy with the results seen in the last three years. Most of all, we are happy with the analysis and investment process we have implemented and relied upon. In terms of returns, there have been some ups and downs during that three‑year period. However, what we have tried to ensure is that we never lose sight of our primary focus. If you have a clear goal in mind and try to improve a little every day, and if your organization can remain patient and allow an adequate time period, it becomes much more likely that you will continue to make the right decisions.

How would you define the fund’s philosophy?

As reflected in the name of the fund itself, we put the focus here on studying human psychology as it relates to investment. This has had a very positive effect on many of the decisions we have made, because during the last three years the markets have been affected by so many emotions, ranging all the way from fear to euphoria. Instead of just listening to the market, we try to take advantage of it. Stock prices don’t tell us anything about whether a company or its management team are good or bad. This is the aspect we try to isolate and understand.

 What is the portfolio’s current composition?

Initially the portfolio was fairly dynamic, because volatility was quite high in 2018 and 2019, and we were able to find some good opportunities. When the market dropped in 2020, much of our work had already been done. At that time, we added a few companies we had already been studying, and we were able to do this at some much more attractive prices. Since then, not getting nervous and keeping the portfolio stable are what have been the most difficult. We have found this to be a beneficial approach. Changes do not need to be made constantly, but instead only when the time is right. The most recent addition to the fund has been the French company Chargeurs, which carries out a variety of niche activities. It has one of those stories of change that the market does not seem to appreciate much, but we find attractive. It is also worth noting that 25% of the portfolio remains invested in the sports industry, with 10% dedicated to professional soccer teams.

One of the cornerstones of this fund is its inclusion of soccer teams listed on the stock exchange. Recently, a few minor Spanish teams have begun to enter the market. Do you think this is just a passing trend, perhaps reflecting increased levels of financial regulation, or will we start to see some of Spain’s larger clubs joining in?

The financial side of international soccer is experiencing a phase of transformation like we have never seen before. Professionalization of the industry is being reflected in increasing financial oversight and better corporate governance, among other effects. Offering stock on an exchange is another way for clubs to raise the capital they need to grow or to provide liquidity for their current shareholders. Spain is the country that has been implementing the best financial controls. Nevertheless, it has the only major European soccer league without any clubs being traded on the stock exchange. This is clearly an anomaly, so it would not be surprising to see this change during the next few years, with at least one club from Spain’s top league or second division listing its stock on the market.

Soccer is a sport with a significant emotional component. Is it a good idea to apply those strong feelings to investment decisions?

It is precisely that substantial emotional component that causes many analysts and investors to keep their distance. However, in our opinion, they are missing out on the interesting historical changes taking place. We can also see the opposite position being taken by American investors. They are much less affected by the emotional side of soccer compared to the Europeans, and they have been buying up teams in various countries over the last few years. We must remember that emotions are a short‑term phenomenon. When a team wins or loses a major tournament, or its star player is injured, or when a new player is signed, the market often reacts very sharply. However, we make our investment decisions by applying a long‑term perspective. We try to filter out the short‑term noise, and we think this gives us a significant advantage when decisions are being made.

What are your expectations for this fund in the upcoming years?

As a good friend of mine who also works in this field likes to say, the only sure thing is that the market will change. And we need to be well prepared for this. We just need to continue along our same path, trying to improve as investors while systematically repeating the process we have come to believe in. We don’t know what will happen in the next few months, let alone the next few years. Trying to make predictions would take us away from the plan we have implemented. What we need to aspire to is the ability to offer double‑digit annualized returns in 5-7 year cycles . Right now we are definitely on the right track, we just need to keep going.