Trade Against Pension Fund Constraints For Better Returns
Individual investors and actively managed mutual funds manage roughly 10 times the money that “sophisticated” investors like hedge funds do.
In turn, pension funds and insurance companies have about twice as much as mutual funds. They are typically highly constrained and invest in the same assets.
My investment philosophy is to study the constraints and biases of large investors and trade against their irrationality.
This is fairly easy to execute if you have at least a six-figure portfolio.
My piece last week, “Another Great Trade You’ve Probably Never Heard Of,” generated a fair number of page views, comments, and emails. Since there seems to be a lot of interest, I’d like to expand on some of the ideas and show more of how you can implement it, with some more explanations and backtests.
As most of you know, my niche is using data to trade against the constraints and biases of investors. I’ll start by explaining the process a little more.
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