Behavioral Economics Strategy Powers High Return Portfolio Managed by Jeffrey S. Pavlik, CIO at Pavlik Capital Management

February 6, 2018

Jeffrey S. Pavlik is CIO at Pavlik Capital Management LLC. Over the last 27 years, Mr. Pavlik has held financial management positions at both large and small business organizations. His broad experience includes equity and interest rate trading, portfolio and risk management, accounting, finance and the development of sophisticated financial systems and strategies which seek to maximize returns and minimize risk.  In this exclusive interview with the Wall Street Transcript, Mr. Pavlik reveals an innovative portfolio selection philosophy.

“The strategy is a relative value strategy created to exploit inefficiencies as defined by the behavioral economics. We do that by creating both long and short exposures to ETFs using options exclusively. Our background is in options, so our focus is on utilizing the best attributes of options, including income generation, downside protection and volatility management.”

The opportunity created by Jeffrey Pavlik and his team is based on behavioral economics:  “…we believe this will eventually create an opportunity as behavioral biases such as overconfidence and the recency bias are clearly in play. With corporate, sovereign and household debt at all-time highs, should the central banks succeed with their inflation mandate, rates will surely be higher than they are today and a remarkable period could exist. After all, most investors don’t believe rates will be headed higher any time soon…”

The positive outcomes are captured through establishing positions that are contrary to most investment professionals.  “While that bet has been successful for quite a while, to make additional bets in that direction does not make sense to us. Therefore, we will continue to attempt to protect portfolios by looking for opportunities to remain longer volatility and benefit from a reversion to more volatile market environments going forward. I personally think it will be sooner rather than later.”

To get more details on this behavioral economics portfolio, read the entire interview at the Wall Street Transcript.