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April 02, 2012 at 10:59 AM
(BRC Investment Management’s braintrust: From left to right, Mark
Jaeger, John Riddle and Sharon Ward.)
2012 U.S. Large-Cap Equity SMA Manager of the Year:
BRC Investment Management
Large-Cap Concentrated Equity Portfolio
This is an expanded profile of one of Investment Advisor-Prima Capital’s 8th annual Separately Managed Account Managers of the Year. View the complete article with all the winners here.
Read about the process of choosing this year’s winners here.
Sure, behavioral economics is a fascinating subject in the abstract; something routinely discussed at conferences and featured in magazine articles. It’s even broken through in pop culture as the underlying concept driving Billy Beane, Brad Pitt’s character in “Moneyball.” But how many advisory and money management firms actually employ Nobel Prize winner Daniel Kahneman’s prospect theory, mental accounting and the other tenets on a sustainable and repeatable basis in the models they’ve developed?
Denver-based BRC Investment Management does, and it’s a major reason they’ve taken the U.S. Large-Cap Equity award from Prima for 2012. It’s even in their name; BRC stands for Bounded Rationality Concepts, which the firm defines as “a modification of the theory of rational choice that takes into account the cognitive limitations of the decision maker—limitations of both knowledge and computational capacity.” In plainer English, it’s the reason we’re too often our own worst enemy, especially when it comes to investing.
“Our strategy is to monetize irrational behavior,” says John Riddle, BRC’s managing principal and chief investment officer. “In that respect, Kahneman and prospect theory are very important to us.”
So how do they do it?
“We can’t produce economic forecasts better than the average of the experts, so we play in a different sandbox,” Riddle explains. “We instead concentrate on what we think changes the expectations of investors and institutions by focusing on the behavior of security analysts.”
