Vince Chen CBOE Interview: Quality Investing with Abacus FCF Leaders ETF (ABFL) - Free Cash Flow Strategy

In this CBOE “3 Questions in 3 Minutes” interview, portfolio manager Vince Chen discusses quality investing challenges and introduces the Abacus FCF Leaders ETF (ABFL). Chen addresses the investment industry’s challenge of defining quality in ETF strategies through free cash flow analysis.

Quality Investing Strategy Challenges

Chen highlights a fundamental issue in modern portfolio management: “While investors generally recognize that high-quality companies tend to outperform over the long term, there’s a fundamental problem: the lack of a universally accepted and quantifiable definition of ‘quality.’”

Traditional quality metrics often provide incomplete assessments. Chen notes that conventional approaches can fail to capture operational efficiency, capital allocation discipline, and long-term sustainability.

The ABFL Approach

Chen explains ABFL’s methodology: “ABFL combines two very commonly used private equity valuation metrics: Free Cash Flow and Return on Invested Capital.” This FCF-ROIC combination bridges institutional analysis with ETF accessibility.

The strategy focuses on companies that generate substantial cash and deploy it efficiently. Chen elaborates: “Our proprietary Abacus FCF Leaders Model incorporates four key alpha drivers: Prudent Capex, Low Accruals, High Cash Flow Margins, and Strong Asset Turnover.”

These four components focus on:

• Prudent Capex: Disciplined capital allocation
• Low Accruals: Earnings quality and cash conversion
• High Cash Flow Margins: Operational efficiency
• Strong Asset Turnover: Capital productivity

Implementation and Applications

ABFL delivers a concentrated portfolio of 50 US large and mid-cap companies selected through the FCF Leaders Model.

For financial advisors, Chen notes that ABFL provides “a clear, rules-based approach to refine client portfolios, making quality investing transparent and easier to understand.”

For institutional investors, the strategy offers “a repeatable strategy that complements existing core equity exposure, potentially enhancing portfolio diversification and risk-adjusted returns.”

Chen’s CBOE interview demonstrates his systematic approach to quality investing strategies, combining quantitative analysis with fundamental research through the FCF-ROIC framework. His methodology addresses the challenge of defining quality in ETF investment strategies by focusing on measurable cash flow generation and capital efficiency metrics for portfolio management.