Victor Higgons, CIIA, is a Fund Manager at Indépendance et Expansion AM, one of the oldest equity funds in France. Victor started is career in management consulting at McKinsey & Company before joining Indépendance et Expansion AM in 2016.
When and how did you start your career in the financial industry? Was a role in the investment funds industry always attractive to you?
I started working in the financial industry in 2016 after finishing an MBA program at INSEAD. I used to work previously as a consultant at McKinsey & Company. The investment industry has always been a sector I have followed closely as my father, William Higgons, runs Indépendance et Expansion AM since 1992. When I joined the company in 2016, the fund had performed a net annual return of +16% for our investor for the past 20 years, which was the top performance among all other Equity funds in Europe. It was therefore attractive and a big challenge to join the investment team and maintain this high level of returns.
What is the most exciting thing about your role as a Fund Manager at Indépendance et Expansion AM?
We are exclusively focused on Equities’ investments in small and medium sized listed companies. What I enjoy most is the good access we can have to the managers and often founders of those companies. I feel always very lucky to be able to meet them, visit them onsite and get to understand how they achieved to build companies that now employ thousands of people. We must not forget that these companies, before being listed, are most of the time great entrepreneurship successes in the first place.
What key principles drive your investment processes and why?
We implement a disciplined “Quality Value” investment process. That means that our aim is to identify companies of great quality, higher than the average, but that have at the same time a very attractive valuation based on the current situation, and not on uncertain estimates. We have developed at Indépendance et Expansion over the past 30 years a set of pillars and criteria that help us identify this good investment opportunities with a long-term perspective. We invest on average in companies for the next 5 years. Our oldest investment that we still hold (Delta Plus) was even initiated in 2006, now 16 years ago! It is quite rewarding to see that our disciplined and long-term approach provides very attractive returns for our investors (+20,3% annual return over the past 10 years).
What companies do you like to include in your portfolio? what companies would you never include in your portfolio?
We are sector-agnostic. That means we can invest in any company that is of high quality (revenue growth, high operating margin, high return on capital employed) and has low valuation multiples (in particular price-to-cash-flow). However, we strictly avoid businesses that we are not able to understand and analyze. In fact, we never invest in large size companies or banks because we feel we are not capable to analyze well their activities. It is usually easier to understand the business of a small size company for several reasons: it tends to focus on one identifiable niche market, the public financial information per million euro of revenues is higher than for a large company, and if you need clarifications, you can interact directly with its top management to improve your understanding.
How are you adapting your portfolio to the current situation of the markets?
We have a long-term approach for our investments. As I stated above, our average period of investment is longer than 5 years, which means that we do not react excessively to recent events. We do obviously take into account what is happening around us, but we try to wait to understand what will be the long term impacts of the economic activities of SMEs in our investment universe.
What sectors do you believe are more interesting at the moment?
We started investing in the wood industry in 2020, when wood prices started to increase. We believe it will be a sector with a lot a value creation in the next decade. The offer is currently limited in Europe and the demand is growing stronger, driven by high imports from China, but also by a European consumption that has strongly increased in the past few years. Demand is strong in the two main end-markets for wood that are construction and heating. The installed base of wood stoves also benefits from a dynamic growth in Europe and it is clear that the current context of energy inflation makes heating with wood log and pellets even more attractive.
How would you describe yourself in 3 words?
Curious, rigorous, patient
Would you give any advice to anyone wanting to start a career in the asset management industry?
When it comes to equity investment, which is the only area of the asset management industry that I know, I would recommend anyone starting her/his career to refrain from following trends and fashions. It might provide good results for some years, but if you want to last in this industry, I am convinced it is better to stay away from bubbles and to invest based on tangible valuations, not uncertain estimates.