VI Fund Series
The VI Fund seeks to marry a quantitative approach to the value investing philosophy, known as Quantitative Value Investing, focusing on the key to both investment styles.
Value investing, a philosophy first established by Benjamin Graham and later popularised by Warren Buffett, seeks to take ownership in fundamentally strong businesses at a discount compared to their intrinsic value through a deep understanding of their business model.
Despite the widespread adoption of this traditional philosophy, the Efficient Market Hypothesis remains elusive and the value phenomenon persists, largely due to human irrationality, the availability of information regardless of its relevancy, and cognitive biases.
This inherent behavioural weakness may never be eliminated, hence the adoption of quantitative tools to guide our decisions and minimise such influences on our portfolio.
The quantitative tools that we developed to protect the portfolio are based on several key parameters and backtested through decades of publicly available information, and can be grouped into these stages:
Financial Distress and Manipulation
Quality
Growth
Valuation
Momentum
The best ideas in each category are generated periodically and filtered to present a pool of potential investable companies, where the fundamentals are scrutinised through a multi-step process:
Right Business
(Moat, Durability, and Longevity)
We look for businesses with three factors: an economic moat, durability, and most importantly, compounding potential. These three are sources of qualitative insights that are less efficiently priced, enabling us to potentially unearth growth champions that are mispriced yet with a long runway of growth.
Right Management
(Founder-led, Aligned, and Track Record)
We look for founder-led businesses with high ownership and those that are aligned with stakeholders through their values and passion. Likewise, we check their track record showing their capabilities.
Risk
(Accounting/Credit, and Misgovernance Risks)
We strive to understand what the key risks are, with the intent to make better decisions, or rather, how to avoid making stupid ones. Decision-making is not about making brilliant decisions but avoiding terrible ones. It is presumptuous to assume that we will not make mistakes and dumb decisions. We may make more, but we aim to be on high alert to avoid the big or “fatal” ones. We are confident of our Risk Assessment Process which can detect accounting/credit & misgovernance risks.
Right Execution
The essence of equity investing is buying (and staying invested in) only those stocks with a significant value-price gap.
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