IBI Fund Based on Dan Ariely's Model Shut Down After Poor Performance
Translated & summarized from Calcalist by baba
IBI is closing its mutual fund, the IBI D.A. MODEL, launched in 2018 with behavioral economics professor Dan Ariely, due to poor performance. The fund generated zero returns over five years and held only NIS 2 million in assets, significantly underperforming the S&P 500. The closure, effective November 25, follows a period of review by IBI, which cited the fund's lack of expected development. Professor Ariely's reputation has also faced recent challenges due to a retracted study.
The story in 6 lines · by baba
- IBI is closing its mutual fund based on Dan Ariely's model due to zero returns over five years.
- The fund managed only NIS 2 million in assets and significantly underperformed the S&P 500.
- The closure of the IBI D.A. MODEL fund will be effective November 25.
- The fund's strategy focused on human capital analysis to predict long-term business success.
- Professor Dan Ariely's reputation has been affected by a retracted research paper.
- IBI cited the fund's activity not developing as expected for the closure decision.
IBI is closing its mutual fund, launched in 2018 in collaboration with behavioral economics professor Dan Ariely, after five years of zero returns and only NIS 2 million in assets. The fund, named IBI D.A. MODEL, will cease operations on November 25. IBI will stop offering units of the fund starting tomorrow, and redemptions will be halted after the closure date. The fund manager will be permitted to deviate from the investment policy to liquidate assets and distribute proceeds to unit holders.
The fund's closure comes despite IBI's standing as one of the largest fund management companies in Israel, overseeing NIS 87 billion in assets. The IBI D.A. MODEL fund, however, managed only NIS 2 million and charged a 1.35% management fee. Year-to-date, it returned 7.2%, lagging behind the S&P 500's 12.35% gain. Over the past five years, the fund lost 0.7%, while the S&P 500 surged 70.2%.
The fund's investment strategy was based on Ariely's theory that a company's long-term success could be predicted by analyzing its human capital. The model, developed with his research team, used a database of hundreds of public companies, primarily in the U.S., collected since 2006. It posited that human capital quality, not just financial data, drives success, and sought to identify employee characteristics indicative of future company performance.
Ariely, a professor at Duke University, is a globally recognized researcher in behavioral economics, known for his work on irrational decision-making and his best-selling books. However, his reputation has been impacted recently after a 24-year-old study was retracted due to data irregularities, with researchers suspecting data manipulation or fabrication. Ariely stated he lacks sufficient documentation to explain the discrepancies and does not recall the experiment details sufficiently to address the claims, but is cooperating with the journal's review process.
IBI stated that the fund's investment model and business aspects were reviewed over time. "After the fund's activity did not develop as expected, the company decided to close it," a company representative said.