Mandelbrot Asset Management start their first fund. Based on the market model of Benoît Mandelbrot, the market neutral fund invests in a selection of German equities trying to generate returns of eight percent. The fund was launched together with Universal Investment on 21. July, 2015. His current assets under management amount to about 11 Million Euro. Please find the German press release here.
The investment strategy of the Mandelbrot Market Neutral Germany (DE000A14N8Q7) is based on scientific insights on the momentum effect, which could be traced back with modern analysis tools (wavelets und fractals) to visions of the mathematician Benoît Mandelbrot. The consequence of the market model named after him is that, contrary to classical capital market theory, an outperformance is possible structurally and in the long term, says Union Investment in their press release. The shares are selected using a regular, proprietary trend evaluation followed by a ranking and a usually monthly rebalancing of all titles.
Further information on the theoretical basics of the fund are explained by Dr. Wilhelm Berghorn, Executive of Mandelbrot Asset Management, in his German guest article “Mandelbrot und Momentum - kann man den Markt schlagen?” on altii.
The fund uses the momentum effect on the German market and constructs a market neutral portfolio. In a long-portfolio, about 75 percent of the fund’s volume are invested. About 50 percent of this equity portfolio are invested into five DAX shares. Five MDax titles will account for another 25 percent of the share portfolio, five TecDAX titles for the remaining 25 percent.
The short portfolio is made up out of future contracts on the DAX performance index amounting to about 75 percent of the funds volume.
“At the bottom line, investors get the performance difference between the share portfolio and the share market,” says Dr. Berghorn. This outperformance of the selected shares against the Dax should lead to an annual return of eight percent with a volatility of twelve percent. The maximal drawdown should not exceed 13 percent.