Redwood ETF seeks to profit from investors' biases

Portfolio manager Richardson GMP employs multiple strategies to exploit price inefficiencies.

Rudy Luukko 17 January, 2018 | 6:00PM

Redwood Behavioural Opportunities, which seeks to profit by exploiting irrational investor behaviour, opened for trading today on the Aequitas NEO Exchange (symbol: BHAV). Sponsored by Redwood Asset Management Inc. and investing primarily in Canadian and U.S. stocks, the new offering is also available in two mutual-fund series.

Portfolio management will be carried out by Richardson GMP's asset-management division, Connected Wealth, which is led by chief investment officer Craig Basinger. "Investors' emotional mistakes are potentially one of the greatest sources of mispriced assets in the market," said Basinger in a release. "This actively managed, multi-approach strategy is a logical way to target -- and profit from -- the behaviours that cause the mispricing."

The Basinger-led team will employ a basket of different strategies to take advantage of behavioural tendencies and inefficiencies in market prices. According to the prospectus, the strategies are designed to perform independently of one another. Thus, the overall volatility of the portfolio will tend to be reduced, since some behaviour-related strategies work better in some market environments than others.

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About Author

Rudy Luukko

Rudy Luukko  Rudy Luukko is a freelance writer who contributes to Morningstar.ca on topics involving fund industry trends and regulatory issues. He retired in May 2018 from his position as editor, investment and personal finance, at Morningstar Canada, where he had worked since 2004. He has also worked as an editor and writer for various general, specialty and institutional media, and he has co-authored courses for the Canadian Securities Institute. Follow Rudy on Twitter: @RudyLuukko.

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