Vince Chen CBOE Interview: Innovation Investing with Abacus FCF Innovation Leaders ETF (ABOT) - R&D Intensity Strategy

In this CBOE “3 Questions in 3 Minutes” interview, portfolio manager Vince Chen discusses the challenges in innovation investing and introduces the Abacus FCF Innovation Leaders ETF (ABOT). Chen addresses the dual problems of innovation definition and investment risk.

The Innovation Investing Challenge

Chen acknowledges the importance of innovation while highlighting key barriers: “Many investors are hesitant. Why? First, the risk is perceived to be high - many innovative ventures fail. Second, there’s the problem of definition - what really is ‘innovation’?”

Despite these challenges, Chen recognizes the opportunity in systematic innovation investing.

The ABOT Approach

Chen explains ABOT’s methodology: “Abacus FCF Innovation Leaders ETF (ABOT) provides a potential solution by focusing on profitable innovators. We start by identifying innovators based on transparent Research & Development (R&D) intensity metrics – we’re looking for companies truly committed to groundbreaking research.”

The strategy combines innovation screening with profitability validation: “Unlike other innovation-focused ETFs, we then combine this with our stringent FCF-ROIC screen to target companies that not only invest heavily in innovation but also generate substantial cash and deploy it efficiently.”

Chen emphasizes the focus on profitable innovation: “It’s about the quality of innovation. Too often, investors just throw money at companies who say they are innovative, we say it isn’t enough. It’s got to be about turning that innovation into cash flow.”

Implementation and Applications

ABOT delivers a concentrated portfolio of 50 profitable innovators selected through the R&D intensity and FCF-ROIC screening process.

Chen outlines the strategy’s benefits: “We believe this provides investors with: Targeted Innovation Exposure; Sustainable Growth Potential and Robust Risk Management.”

For financial advisors, ABOT offers “a way to tap into the excitement surrounding innovation while building more confidence for your client by investing only in the most profitable businesses.”

For institutional investors, the strategy provides “a strategic investment for capitalizing disruptions with proven business models.”

Chen’s CBOE interview demonstrates his systematic approach to innovation investing, combining R&D intensity metrics with cash flow profitability to identify companies that can successfully monetize their innovation investments.