Press release  |  9 May 2016

“Core Holdings”: when preserving capital is synonymous with performance


Thanks to a method inspired by the philosophy of private equity and which departs from the institutional indexed management approach, Core Holdings Europe has outperformed the STOXX Europe 600 index by more than 10% over one year. This remarkable performance during a bear market demonstrates the power of this approach.

At long last, a positive way to combine performance and preservation of capital
Core Holdings uses an exclusive proprietary method developed by Bordier & Cie to analyse and select securities for direct investment. “In our opinion, continually buying and selling shares and using an indexed wealth management approach is a method of the past. Core Holdings departs from that approach by reconciling the interests of our clients with our approach to investing in equities”, explains Michel Juvet, Bordier & Cie partner with responsibility for management and investments.

Performance is built by putting to work the money we have avoided losing
“Our model is inspired by the philosophy of private equity: we do not just buy shares, we invest for the long term in companies whose qualities are reflected in remarkable resilience during bear market phases and whose long-term performance is less sensitive to economic cycles”, notes Frédéric Potelle, Director of Research. “Performance is built first and foremost by avoiding downside excesses and putting to work the money we have avoided losing. This philosophy is aligned with the fundamentals of private banking: protecting and developing the assets entrusted to us with a long-term view that combines tailored service and sustainable performance.”

The best companies at the best price
Our process for selecting companies looks at the following characteristics:

  • through-the-cycle sustainable growth potential
  • high economic profitability, together with relatively low capital intensity, so as to generate high and positive free cash flows at all times
  • a return on capital employed that is consistently higher than the cost of capital, so as to guarantee continuous value creation
  • a high return on equity, resulting from the best possible use of sources of external financing
  • a controlled level of debt to guarantee security at the bottom of the economic cycle

Such a meticulous and thorough analysis of cash flows can only be applied to a limited number of companies. Thanks to an extremely rigorous process that screens out some 80% of the companies included in the index, only those companies eligible for our Core Holdings selection are subjected to fundamental analysis.
Consisting of 20 to 25 companies rigorously selected on the basis of the power of their business models – resilience, cash flow visibility and through-the-cycle value creation – at a reasonable price, Core Holdings Europe does not consist solely of defensive big caps: companies like Symrise and Bureau Veritas are also included.

What about performance?
Core Holdings Europe has rapidly demonstrated its potential by outperforming its benchmark, the STOXX Europe 600, by more than 10% over one year. While the portfolio remained in line with the European market up to the end of June 2015, it went on to outperform by more than 5% during the summer 2016 correction (China, emerging markets, Fed). The same phenomenon was repeated at the end of 2015 and in early 2016, with a performance differential that was maintained during the bull market phase.

The Core Holdings Europe selection thus lost 4% over the period between 21 April 2015 and 20 April 2016, compared with a 14% decline in the STOXX Europe 600 over the same period, equating to outperformance of more than 10%.

After one year of activity, the economic performance of the selected companies is in line with our expectations. In terms of stock market performance, our selected equities have, on average, outperformed the market. This differential is largely maintained during bull market phases. “Over time, this differential becomes a great ally, because investors capitalise in the long term on the money they were able to protect during bear market phases. This approach demonstrates that capital preservation and performance are not conflicting concepts, rather they are complementary: the first promotes the second”, adds Frédéric Potelle.

For more information:
Christophe Leu
Head of Communication
Direct +41 58 258 03 54
christophe.leu@bordier.com

As private bankers in the truest sense of the word, offering great stability and financial strength, we cultivate our independence in order to give you the guaranteed benefit of a unique “Bordier experience” that combines tailored service and sustainable performance.