"Handling the psychological aspect is the biggest challenge in investing"
In the "MAPFRE AM Interview of the Month" section, Luis García, manager of the MAPFRE AM Behavioral Fund, explains the importance of psychology in investments and the fund's philosophy.
- How long have you been with MAPFRE AM? Tell us about your experience and day-to-day work.
I have just completed seven years here, and many things have happened, so I have never been bored. We launched the Luxembourg SICAV and, with it, the MAPFRE AM Behavioral Fund in September 2018, which is what’s taken up most of my time these past few years. Also, more recently, we started a very different venture, which is the podcast La Bolsa De Deporte. I think we’ve created unique content and it’s provided an opportunity to listen to elite athletes talk about their financial planning.
- You’re the manager of one of MAPFRE's thematic funds. What’s the strategy of the MAPFRE AM Behavioral Fund?
It’s a European stock market fund that follows a value investing philosophy. It doesn’t mean solely buying companies trading at low multiples, but rather as a way of understanding our work. We try to understand the businesses we invest in as best we can, seek out market inefficiencies and be patient if we think we may be right in our arguments. So we added an additional layer, which is the study of behavioral finance. This idea is very important and, for this reason, we then decided that it would give the fund its name. The most difficult aspect of investing is undoubtedly managing the psychological side of things.
- How has the fund performed and what are your forecasts?
In all these years, I think we should be happy with the fund's performance. But above all with the work that has been done to establish an investment process that has given rise to a product that I believe is quite different from what can be found in the market. There have been better years, such as 2021, in which I was lucky enough to receive the award for Best Fund Manager in Spain. And other, less good years, such as this recently completed 2022, in which the performance of small and mid-cap companies, which are very present in the fund, was surprisingly negative. It is precisely the relative underperformance of these types of companies over the last year and the potential we see right now in some of the companies in the fund that makes me particularly optimistic at this time.
- What are the stocks with more weight in the portfolio and why?
Among the fund's top positions at the moment we find, in first place, the German soccer club Borussia Dortmund, as a consequence of our argument for investment in sports and, in particular, in European soccer. Secondly, STMicroelectronics, a French semiconductor manufacturer, with fantastic management and yet undervalued by the market compared to its competitors, an assessment we do not share. Third, Unieuro, an Italian electronics and home appliance chain that represents the fund's philosophy very well, as all the market noise has long gone against it, but its economic fundamentals are very attractive. Also Pagerduty, a U.S. company dedicated to solving online problems in websites, such as e-commerce, where reaction time is very important. And finally, Gaztransport et Technigaz, a French engineering company with a unique technology used for LNG tankers.
- Do you think there is room for more clubs to go public, especially in Spain?
Definitely. Going public is one more financing option for companies, which can sometimes offer many benefits. Spain is the only one of the five major European soccer leagues that does not have any publicly traded professional soccer clubs. The others, the United Kingdom, Italy, France and Germany, now have at least one. And, curiously, the Spanish league is, from our point of view, the most interesting competition for investors to invest in, as it is the one that has best applied economic sustainability criteria for clubs.
- In recent months, there have been many corporate operations in the sports sector. Why this renewed interest?
Two factors have been converged here. One is precisely the arrival of financial controls, which I have already mentioned, and which will make it possible, as revenues grow, for the increase in operating profit to be even greater, as has already happened in the United States. The second is the large relative undervaluation of European sports compared to American sports. Investors across the pond, who have already been through a history of growing sports franchise valuations, are now seeing an opportunity to repeat that history in Europe, with entry prices that are still very attractive.
- Do you think this type of fund, which is so closely linked to sports, should be considered ESG? Why?
Yes, definitely. In fact, I'm really surprised they aren't already. Certainly I can think of few sectors of activity that are a better fit for this investment philosophy and that have so many and so varied opportunities to make a positive impact on the world of tomorrow.
Hobbies: First, spending time with my family and friends. And I love sports. Watching them as a spectator and, above all, playing them.
A dish: It’s hard to choose just one. It really depends on the moment.
A city/country: I think Madrid is one of the best cities in the world to live in. In my free time, I like Malaga, where we usually spend our summers, and Bilbao, my wife's city. Outside Spain, New York and London are very special to me, for several reasons.
A musical group: Joaquín Sabina, by a very wide margin.