Christophe Bernard, former chief investment strategist and multi-asset head at Vontobel, will manage a new equity fund for London-based boutique ValuAnalysis.
The ValuFocus fund is a Luxembourg Sicav designed to invest in global equities and aims to beat the global equity market by two or three percentage points.
The fund will be managed by both Bernard and Pascal Costantini, who used to work together at Deutsche Bank.
They will use the cash flow model that will be breaking down a company’s market value into three main components: replacement value, franchise value and growth value. This will allow the fund managers to find underappreciated companies.
The fund rules out companies with excessive or hidden leverage, whose economic rent is structurally below the cost of capital, or which have recently made a large acquisition. This will allow the strategy to avoid names that can cause permanent capital loss.
‘Sectors such as energy and natural resources, where replacement value cannot be easily determined, are also excluded, positioning the portfolio with a favourable CO2 emission footprint. By virtue of the team‘s approach, the ValuFocus strategy tends to favour stocks which rank well against ESG criteria,’ the firm stated.
Costantini used to be head of sector strategy, quantitative equity research at Deutsche Bank where he led the CROCI valuation group until 2009. During his career he has adapted and re-engineered economic value-added models used by industry consultants into stock market valuation models.
Commenting on the fund launch, Christophe Bernard said: ‘I am truly pleased that we can now introduce the ValuFocus Fund to the wider market.
‘We’ve seen this proprietary approach deliver significant excess return over time. We believe it can set us apart in an environment where both quantitative and active fundamental managers have struggled to meet investors’ expectations.’
Constantini added: ‘We have developed a proprietary approach that transforms accounting data into relevant economic numbers and breaks down the economic sources of value in a business.
‘Our research process is time-consuming and laborious, but we believe this is the only way to assess the true economic value of a company.’
Joakim Darras and Diarmid Ogilvy, who worked with Costantini at Deutsche Bank to develop CROCI, are also founders and managing partners of the firm.
ValuFocus Fund already has $10m seeding capital from the founders.