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Many start-ups are born from a fusion of idealism, entrepreneurial drive, a pursuit of independence, a hunger for profitability and a desire to challenge the status quo. For Comgest founders, Wedig von Gaudecker and Jean-François Canton, this combination was the catalyst that helped them spark a revolution in France’s portfolio management landscape – breaking down bureaucratic barriers, championing long-term quality growth and building an exceptional partnership model.

In the mid-1980s, the veteran portfolio managers worked in Paris at France’s Banque Indosuez where they managed European (Wedig) and Asian (Jean-François) equity portfolios. The two developed a strong camaraderie while debating the best strategies that would enable them to beat market averages over the long term. The key to their market conundrum came when German native Wedig stumbled upon a Fortune magazine article discussing how most portfolio managers, regardless of their analytical prowess, could never do better than market indices.

Instead of focusing on the dire prediction for his profession, he was intrigued by the story’s references to a few equity portfolio managers who had actually managed to beat the indices. The names that stood out were the “Oracle of Omaha”, Warren Buffett of Berkshire Hathaway and his right-hand man, Charlie Munger. Both had studied financial analysis under Benjamin Graham, the “father of value investing”.¹ After diving into Berkshire’s annual reports and letters to shareholders, Wedig took note of the company’s emphasis on a shareholder partnership, tying investment success to the company's prospects.

Their concept asserted that success is determined by having a protected market position, such as brand, patents, an indispensable product, a unique service – attributes that are difficult for competitors to imitate – along with strong management, all based on sound finances. This strategy, dubbed “Quality Growth”, focused on companies with favourable positions that were capable of reliably forecasting and discounting future earnings. But could such a style succeed in Europe?

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¹ Graham, Benjamin, 1894-1976. The Intelligent Investor: A Book of Practical Counsel. New York; Harper, 1959.
Image source: Comgest archives.