Periods such as this call for calm and adherence to one’s disciplines. This is precisely what we are endeavouring to do. There was no place to hide over the most recent trading days, but we do believe this crisis will pass and that focusing on the long-term operating and financial fundamentals will prove a successful strategy. The Coho strategy offered protection during the IT crash in 2001, the financial crisis in 2008, the Euro crisis in 2011 and during Q4 of 2018.
Since the record highs only a few weeks ago till March 9th end of day, the S&P 500 is down 18.06%, The Russell 1000 Value is down 20.03% and the Coho ESG US Equity strategy is down 12.84%. A downmarket capture of 71% vs the S&P 500 and 64% vs the Russell 1000 Value.
We aim for a down market capture of 65%-75% and that is again what we deliver. Our aim to protect principal in down markets and generate competitive returns in up markets has directed us via a bottom up approach to a contrarian position vs benchmark and most peers.
The Coho portfolio is very attractively priced from an historical perspective and we have full confidence in future results.
Sometimes it can take a long time, but eventually you gain more by loosing less, as a small reminder the 2008-2009 period combined below.
What began as an extension of January’s gains was quickly reversed as news of the Coronavirus spread beyond China’s borders. Domestic equity markets were having quite a good month through mid-February, with the S&P 500 Index reaching 3386.15 on February 19th, up 5.1% month-to-date at that point, and the Russell 1000 Value Index cresting on February 12th at 1363.50, up 3.4%. Coho Partners peaked on February 20th, when we had advanced 4.12%. Then, over the ensuing seven trading days, the S&P 500 Index declined 12.7%, the Russell 1000 Value Index by 13.0%, and Coho Partners by 10.7%. So, by the end of the month, the impressive early February gains had all been lost and the S&P 500 Index finished down 8.2%, the Russell 1000 Value Index by 9.7%, and Coho Partners by 6.7%. Dissecting the last seven trading days in February, one would see that there was relatively little dispersion between sectors as the best performing sector was Consumer Staples, which outperformed the S&P 500 Index’s decline of 12.8% by only 2.7% and the Energy sector was the worst performing sector and it underperformed by 3.9%. All the other sectors were fairly close to the market’s broad decline. Chart 1 shows the sector weights and the respective total returns from the peak in the S&P 500 Index on February 19, 2020.
Coho ESG US Large Cap Equities
The Coho ESG US Equity strategy (inception 2011) only deviates marginally from the original Coho Relative Value Equity strategy (inception 2000). The ESG approach is fully integrated in the investment process, while keeping the original characteristics in place. A daily liquid UCITS fund of USD 180 million is available for European investors: ISIN: IE00BF1XKT19
Please email to email@example.com to set up a call or webinar with Coho
As per Q4, 2019 the Coho Relative Value Equity (CRVE) strategy has an annualized outperformance of 3.4% over the S&P 500 Total Return index since inception in 2000. Coho outperforms 93% of peers in the eVestment database since inception. This strategy of quality companies with predictable streams of earnings offered protection during the IT crash in 2001, the financial crisis in 2008, the Euro crisis in 2011 and recently during Q4 of 2018. The strategy is fully invested without the use of derivatives. Over the last 19 years, the down-market capture has been 71,8 %. This resulted in superior performance with lower risk versus the benchmark and most peers. While keeping the characteristics of the CRVE strategy in place, the ESG portfolio was established in 2011. Coho Partners manages USD 8 billion in US Large Cap Equities. Coho is an independent firm, employee-owned and many employees are invested alongside investors. The valuation of the Coho strategy versus the S&P 500 has become very attractive after multiple years of outperformance of economic sensitive stocks. This defensive strategy is a strong candidate in an environment of gradual rising, steady or declining markets.
Coho Partners has a contrarian allocation and focusses first and foremost on capital preservation. You can reduce the downmarket capture and beta of your portfolio, while the relative attractive valuation of the Coho holdings offer upside.