A London-based boutique founded partly by a former Deutsche Bank quant expert says its new fund’s strategy, which focuses on valuations, could achieve returns two or three percentage points above global equity markets.
The firm, ValuAnalysis, says its Ucits-regulated ValuFocus Fund invests in stocks with sustainable returns whose competitive advantage is under-appreciated by the market.
The founders, who are backing the fund with $10 million of seed capital, include Pascal Costantini, one of the lead managers who was previously a quantitative equity research specialist at Deutsche Bank, and Christophe Bernard, co-manager and formerly at Vontobel in a chief investment officer position.
Two former colleagues of Costantini from Deutsche Bank are also founders.
Among the details of the strategy is a bar against companies with excessive or hidden leverage, whose “economic rent is structurally below the cost of capital”, or which have recently made a large acquisition. By carrying out these exclusions, ValuAnalysis says it could reduce the risk of incurring severe, permanent capital loss.
Costantini, who is now ValuAnalysis’ head of research and co-portfolio manager, has 32 years’ equity markets experience where he has adapted and re-engineered “economic value-added models” used by industry consultants into stock market valuation models. He was previously head sector strategy, quantitative equity research, at Deutsche Bank until 2009.
He 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.”
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