ValuAnalysis has launched the ValuFocus Fund, an actively managed Luxembourg-based UCITS strategy that targets returns of two to three percentage points above global equity markets.
Through proprietary research, ValuAnalysis identifies stocks which create sustainable value for shareholders. Out of this universe, the ValuFocus Fund invests in the stocks with a competitive advantage that is under-appreciated by the market.
The fund is being launched with $10 million of seed capital from the founders.
The investment team is led by managing partners Pascal Costantini (who is also head of research), and Christophe Bernard. Between them, the two co-portfolio managers have 60 years of combined equity research and portfolio management experience.
At Deutsche Bank, Mr Constantini led the CROCI (Cash Returns on Invested Capital) Valuation Group, which developed a unique equity research cash flow model. During his tenure, the CROCI-driven investment indices reached in excess of $10 billion of assets under management.
This cash flow model, where accounting data is transformed into relevant economic numbers, has been further developed by breaking down a company’s market value into its three components: replacement value, franchise value and growth value. This process enables managers to locate companies with a competitive advantage which is not recognised by market participants.
The strategy rules out companies with excessive or hidden leverage, or with economic rent that is structurally below the cost of capital, or which have recently made a large acquisition. ValuAnalysis believes these exclusions reduce the risk of severe, 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. Typically, the strategy tends to favour stocks which rank well against ESG criteria. ValuAnalysis also rules out investments in companies which exhibit a poor ESG score, as such companies are particularly vulnerable to regulatory and reputational risk.
Commenting on the fund’s launch, Mr Costantini said: “Accounting rules were never designed to support investment decisions. 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. We are thrilled to have the opportunity to demonstrate how stock selection can be implemented in this way, built on decades of experience in equity research analysis.”
Mr Bernard added: “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.”
