Our process
Philippe Hottinguer Gestion draws on its expertise in equities, bonds and extra-financial analysis to support institutional investors in the management and allocation of their assets, building on the Abacus management philosophy.
“Our investment philosophy, known as Abacus, rests on a simple conviction: to invest in high-quality companies at reasonable valuations.
We pursue conviction-based management, independent of benchmark indices, aiming for sustainable, risk-adjusted performance and integrating both financial and extra-financial criteria.”
Edwin Faure, Chief Investment Officer
Our management philosophy
Investing in quality
We build portfolios from a selected universe of quality issuers, filtered according to demanding fundamental and extra-financial criteria.
Understanding in depth
Every investment is based on in-depth fundamental analysis, incorporating the reading of economic cycles, the quality of business models and dialogue with management.
Integrating sustainability
ESG criteria are fully embedded in the decision-making process, in order to identify risks, anticipate transformations and favour the most responsible players.
Investing with discipline
Investment decisions are based on a rigorous assessment of the risk/return trade-off and strict valuation discipline, ensuring a margin of safety.
Building with conviction
Portfolios are concentrated, built around the best ideas and actively monitored in order to adapt to changes in fundamentals and markets.
Our Abacus investment process
Portfolio construction
The investment universe defines the perimeter within which we operate and from which we select the securities that will build tomorrow’s performance. Each fund has its own perimeter, framed by market and financial criteria: geographical area, capitalisation or bond segment, liquidity and currency. These boundaries define a precise investment field, which is then refined by an initial extra-financial filter.
The structure of our methodology includes particular attention to sustainability considerations. The systematic exclusion of companies engaged in controversial activities aims to align these interests. This narrows the universe in the same way as financial analysis, beginning with our exclusion policy — on the one hand norm-based, by setting aside companies involved in controversial weapons or in breach of the ten principles of the United Nations Global Compact and the OECD guidelines, and on the other hand sector-based, by excluding fossil fuels, coal-fired electricity, tobacco and the adult entertainment industry.
This analysis is based on a dual reading that follows a positive selection logic, applied — depending on the fund — through a “Best in Universe” or “Best in Class” approach. In the former, we retain the companies with the best extra-financial ratings within the investment universe regardless of sector, thereby favouring the most responsible companies irrespective of their field of activity; in the latter, we select the best-rated companies within each business sector.
Finally, the securities we select must reflect our management philosophy and offer an attractive risk/return profile, displaying solid and proven financial characteristics.
Fundamental analysis
Our approach is based on a dual reading: on the one hand, a top-down analysis to identify economic cycles, sector dynamics and areas of structural growth; on the other, a bottom-up approach, in which a company’s current fundamentals form the seedbed of its future growth.
Within the macroeconomic reading, our equity exposure — whose trajectory has historically been sensitive to the interest-rate environment, stimulus policies and investors’ perception of risk — makes it possible to place each case in its context and to steer allocation without sector constraints or dependence on a benchmark index. It also takes on particular importance in bond markets, where the direction of monetary policy, the path of inflation, the slope of the yield curve and the dynamics of risk premia directly determine the risk/return trade-off.
Finally, the examination of each issuer follows a quality-at-a-reasonable-price approach: we look for sound business models or robust credit profiles, capable of growing or meeting their commitments over the long term, without ever losing sight of the price paid. The analysis focuses on the true drivers of value creation (organic growth, operating leverage, barriers to entry, margin resilience and return on capital employed) and on the foundations of financial soundness: cash generation, balance-sheet structure and visibility of prospects. A quality company only becomes a conviction provided it offers, at the current price, a sufficient margin of safety. Meeting management directly ultimately completes and confirms the analysis.
Over the course of several hundred meetings each year, we assess the quality of management, the clarity of the strategy, the transparency of the accounts and the concrete ability to execute the announced plan.
ESG strategy
Convinced of the relevance of responsible and conscientious investment, Philippe Hottinguer Gestion is committed, in this spirit, to promoting and contributing to the redirection of financial flows towards more sustainable assets. Our responsible approach is an integral part of the “Abacus” process and is based on 2 principles: reducing risks in order to limit the negative impact on value and on the environment, and seizing opportunities in order to favour and encourage positive impact. To this end, we have developed our tools in-house to ensure continuous ESG integration, from the initial selection of an asset through to its monitoring.
This range of tools draws on a broad set of criteria assessed according to the principle of double materiality and spread across four pillars (environmental, social, societal and governance). They cover ESG, SDG and sustainability analysis, and enable us to control the quality and traceability of data as well as the proper application of our approach, and they apply to all of our funds, classified as Article 8 or 9 under SFDR.
Particular attention is also paid to the monitoring of controversies, considered a signal in its own right of an issuer’s extra-financial quality. Indeed, the emergence of a controversy is assessed according to the severity, probability and scale of the potential negative impact. In addition to this, Philippe Hottinguer Gestion is committed to promoting the consideration of sustainability issues, both among its clients and investors and in the decision-making processes and activities of the companies in which it invests.
Valuation
This is the final requirement of our selection, and the one that turns a good company into a good investment. True to our quality-at-a-reasonable-price approach, we only commit capital when the risk/return trade-off offers a sufficient margin of safety, assessed by weighing up fundamentals, growth prospects, valuation levels and the visibility of results. Risk is not a constraint added at the end of the journey: it is built in from the selection stage, on the same footing as quality or valuation. To the market risks inherent in equities — accentuated in the small- and micro-cap segment by more limited liquidity and sometimes higher volatility — as well as the credit, interest-rate, liquidity and spread risks inherent in bonds, are added the extra-financial risks highlighted by our ESG analysis. This overall reading determines both the decision to invest and the size allocated to each position.
A conviction portfolio, monitored continuously
At the end of this process, the portfolio is a direct reflection of our convictions. It is built in an active and concentrated way, with a logic of controlled diversification: each holding is included only for what it contributes to the overall risk/return profile and for its consistency with the overall balance, with attention to liquidity being all the more decisive in the least liquid segments. Monitoring, for its part, never stops. Fuelled by regular dialogue with management and finance teams, it extends over time the analysis carried out upstream and makes it possible to adjust weightings as fundamentals and markets evolve. It is this living management that allows active reallocation towards the holdings with the greatest re-rating potential and maintains, at all times, the alignment of the portfolio with our best ideas.