With the launch of the Mandelbrot Europe fund, Mandelbrot Asset Management and Universal Investment have added a directional strategy for European equities to their shared funds family.
This new, rules-based approach applies the same investment logic as that of the Mandelbrot market neutral Germany fund successfully launched nearly two years ago and the Mandelbrot market neutral US Technology fund. As with the existing product family, the stocks signalling the greatest performance potential are systematically selected, this time from the STOXX® 600 universe.
“Unlike our two existing funds with the Mandelbrot Europe fund we rely on a directional investment approach that relies on the momentum effect,” commented Wilhelm Berghorn, managing director of Mandelbrot Asset Management, “in other words the systematic search for stocks most likely to profit disproportionately from rising markets”.
This approach is especially suitable for diversifying strategies, in particular value strategies. The greatly diverging excess returns of the two models, as can be seen in the relevant literature, form the basis for this strategy.
“While the well-known momentum-factor strategies rely on the broadest possible market base, we focus on a portfolio of some 30 equities from the STOXX® 600 universe”, Berghorn added. In combination with the innovative investment logic, the objective of this strategy is to generate far greater alpha from the momentum effect. “The extent to which this effect can be exploited is evidenced in our asset management since the launch of the strategy one and a half years ago”, said Marcel van Leeuwen from Deutsche Wertpapiertreuhand that also functions as the fund’s liability umbrella.
“While classic momentum factors managed to generate excess returns in the low single-digit region, the Mandelbrot strategy achieved far stronger results”, commented van Leeuwen.
The investment approach relies on the latest findings on the momentum effect that can be attributed to a vision of the mathematician Benoît Mandelbrot using modern analysis methods. The Mandelbrot market model named after him offers an explanation for this effect and bases its theory on fractal markets.