Charles de Vaulx
Encyclopedia
Charles de Vaulx is a French-born asset manager (i.e., one who practices asset management), noted for his value investing
in the spirit of Graham
and Dodd
.
, France. In January 1987, de Vaulx joined the SoGen Funds, working under Jean-Marie Eveillard
as an analyst. In August 1996, de Vaulx became an associate portfolio manager. In 1999, Société Générale
sold the SoGen Funds to Arnold and S. Bleichroeder Advisers and the funds were renamed First Eagle Funds. In January 2000, de Vaulx was made co-portfolio manager of four funds and a number of institutional accounts. In December 2001 he and his colleague Jean-Marie Eveillard were awarded Morningstar's "International Stock Manager of the Year." De Vaulx was designated as the hand-picked successor to Eveillard who went on to retire in December 2004, making de Vaulx the lead portfolio manager in January 2005. Surprising the industry, as well captured by the media at the time ( see the MarketWatch story ) de Vaulx left First Eagle, this just weeks after winning another Morningstar award in December 2006 as the runner-up for "International Stock Manager of the Year." In 2008, de Vaulx joined International Value Advisors.
s which happen to be selling at some discount, and where those cash flows also turn into higher yields for investors. So his portfolios tend to have higher yields than the index
. From his history at First Eagle (2000 - early 2007), he also tends to keep a goodly amount of cash on hand, but part of this could be explained by the dearth of values some of that time. Notably, de Vaulx's funds tended to underperform in up markets during a boom (for example, the dot-com bubble
). However, de Vaulx's large cash positions also helped to mitigate the impacts of the 2000-2002 stock market
correction, when a number of his funds outperfomed by large margins. Additionally, de Vaulx tended to keep some small part of the portfolios in gold
and in bonds
, thus providing additional hedges
to the equity volatility
. Unsurprisingly, these non-correlating assets tended to give the portfolios low R-squareds
to most indexes. The combination of large cash holdings with stocks paying above average dividend
s with some other non-correlating assets created low Beta
portfolios with market-beating Sharpe ratio
s. Of course, past performance is no guarantee of future returns, but some academic literature does seem to suggest that low-beta asset allocations do provide greater Sharpe ratio
s over time. Counter to that literature is the premise that "there is no free lunch" and that any outperformance will eventually disappear as copy-cats reduce margins of outperforming managers.
Value investing
Value investing is an investment paradigm that derives from the ideas on investment and speculation that Ben Graham and David Dodd began teaching at Columbia Business School in 1928 and subsequently developed in their 1934 text Security Analysis...
in the spirit of Graham
Benjamin Graham
Benjamin Graham was an American economist and professional investor. Graham is considered the first proponent of value investing, an investment approach he began teaching at Columbia Business School in 1928 and subsequently refined with David Dodd through various editions of their famous book...
and Dodd
David Dodd
David LeFevre Dodd was an American educator, financial analyst, author, economist, professional investor, and in his student years, a of, and as a postgraduate, close colleague of Benjamin Graham at Columbia Business School.The Wall Street Crash of 1929 almost wiped out Graham, who had started...
.
Background and history
He earned a Master in Finance from Ecole Supérieure de Commerce de RouenÉcole Supérieure de Commerce de Rouen
The Ecole Supérieure de Commerce de Rouen is a leading French business school.ESC Rouen's quality is recognized at European level through its EQUIS accreditation and its Financial Times' ranking 13th position best European Master in Management...
, France. In January 1987, de Vaulx joined the SoGen Funds, working under Jean-Marie Eveillard
Jean-Marie Eveillard
Jean-Marie Eveillard is a French-born international investor who currently serves as the senior investment adviser to First Eagle Funds. Eveillard, who served more than a quarter century as a portfolio manager, was co-honored in 2001 by Morningstar, Inc. as "Stock Manager of the Year" and was a...
as an analyst. In August 1996, de Vaulx became an associate portfolio manager. In 1999, Société Générale
Société Générale
Société Générale S.A. is a large European Bank and a major Financial Services company that has a substantial global presence. Its registered office is on Boulevard Haussmann in the 9th arrondissement of Paris, while its head office is in the Tours Société Générale in the business district of La...
sold the SoGen Funds to Arnold and S. Bleichroeder Advisers and the funds were renamed First Eagle Funds. In January 2000, de Vaulx was made co-portfolio manager of four funds and a number of institutional accounts. In December 2001 he and his colleague Jean-Marie Eveillard were awarded Morningstar's "International Stock Manager of the Year." De Vaulx was designated as the hand-picked successor to Eveillard who went on to retire in December 2004, making de Vaulx the lead portfolio manager in January 2005. Surprising the industry, as well captured by the media at the time ( see the MarketWatch story ) de Vaulx left First Eagle, this just weeks after winning another Morningstar award in December 2006 as the runner-up for "International Stock Manager of the Year." In 2008, de Vaulx joined International Value Advisors.
Portfolio management
De Vaulx's portfolio management style has been characterized as value-oriented and long-only. This value tilt tends to find de Vaulx investing into firms with stronger cash flowCash flow
Cash flow is the movement of money into or out of a business, project, or financial product. It is usually measured during a specified, finite period of time. Measurement of cash flow can be used for calculating other parameters that give information on a company's value and situation.Cash flow...
s which happen to be selling at some discount, and where those cash flows also turn into higher yields for investors. So his portfolios tend to have higher yields than the index
Stock market index
A stock market index is a method of measuring a section of the stock market. Many indices are cited by news or financial services firms and are used as benchmarks, to measure the performance of portfolios such as mutual funds....
. From his history at First Eagle (2000 - early 2007), he also tends to keep a goodly amount of cash on hand, but part of this could be explained by the dearth of values some of that time. Notably, de Vaulx's funds tended to underperform in up markets during a boom (for example, the dot-com bubble
Dot-com bubble
The dot-com bubble was a speculative bubble covering roughly 1995–2000 during which stock markets in industrialized nations saw their equity value rise rapidly from growth in the more...
). However, de Vaulx's large cash positions also helped to mitigate the impacts of the 2000-2002 stock market
Stock market
A stock market or equity market is a public entity for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.The size of the world stock market was estimated at about $36.6 trillion...
correction, when a number of his funds outperfomed by large margins. Additionally, de Vaulx tended to keep some small part of the portfolios in gold
Gold as an investment
Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a hedge or harbor against economic, political, or social fiat currency crises...
and in bonds
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
, thus providing additional hedges
Hedge (finance)
A hedge is an investment position intended to offset potential losses that may be incurred by a companion investment.A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts, swaps, options, many types of...
to the equity volatility
Volatility (finance)
In finance, volatility is a measure for variation of price of a financial instrument over time. Historic volatility is derived from time series of past market prices...
. Unsurprisingly, these non-correlating assets tended to give the portfolios low R-squareds
Coefficient of determination
In statistics, the coefficient of determination R2 is used in the context of statistical models whose main purpose is the prediction of future outcomes on the basis of other related information. It is the proportion of variability in a data set that is accounted for by the statistical model...
to most indexes. The combination of large cash holdings with stocks paying above average dividend
Dividend
Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business , or it can be distributed to...
s with some other non-correlating assets created low Beta
Beta coefficient
In finance, the Beta of a stock or portfolio is a number describing the relation of its returns with those of the financial market as a whole.An asset has a Beta of zero if its returns change independently of changes in the market's returns...
portfolios with market-beating Sharpe ratio
Sharpe ratio
The Sharpe ratio or Sharpe index or Sharpe measure or reward-to-variability ratio is a measure of the excess return per unit of deviation in an investment asset or a trading strategy, typically referred to as risk , named after William Forsyth Sharpe...
s. Of course, past performance is no guarantee of future returns, but some academic literature does seem to suggest that low-beta asset allocations do provide greater Sharpe ratio
Sharpe ratio
The Sharpe ratio or Sharpe index or Sharpe measure or reward-to-variability ratio is a measure of the excess return per unit of deviation in an investment asset or a trading strategy, typically referred to as risk , named after William Forsyth Sharpe...
s over time. Counter to that literature is the premise that "there is no free lunch" and that any outperformance will eventually disappear as copy-cats reduce margins of outperforming managers.