Wednesday, July 30, 2008
Investing against "the Congressional effect"
A new mutual fund invests with the belief that it can achieve above-market returns by jumping in when Congress is out of session and selling when it is in session:
The Congressional Effect Fund is the first mutual fund to explicitly seek to minimize investor exposure to potentially negative impact of new and proposed Congressional legislation on the broad stock market.
The Congressional Effect Fund seeks to capture the historically higher returns on Congressional out of session days by primarily having exposure to price moves of the broad market as measured by the S & P 500 index on vacation days. The Fund does not try to capture the dividends of stocks in the index. Instead, it invests in interest bearing instruments including, without limitation, treasury bills, other government obligations and bonds, collateralized repurchase contracts, money market instruments and money market funds.
Sounds plausible! It would be interesting to know whether the Congressional effect is greater when Congress and the White House are controlled by the same party, or whether it matters whether the Republicans or the Democrats are in control.
CWCID: Donald L. Luskin.
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