Saturday, Apr 4, 2020
International Finance
Asset Management Magazine

Long-term strategy helps Cocolife funds beat the market

Cocolife Asset Management Company’s funds have delivered superior returns since inception – here’s how

Cocolife Asset Management Company Inc. (CAMCI) of the Philippines has distinguished itself in the Philippines asset management market with all its funds delivering superior returns since inception. The history of Cocolife Asset Management started in November 1993 when United Fund Inc. (UFI) was launched with United Coconut Planters Bank (UCPB) as the investment manager and distributor.

Accordingly, UFI was among the five-member funds that organised the Philippine Investment Funds Association (PIFA) in 1996. The management of UFI was then transferred to COCOLIFE (United Coconut Planters Life Assurance Corporation) in 2001. Two years later, CAMCI was incorporated and was appointed as the investment manager and principal distributor of United Fund, Inc.  Soon afterward, Cocolife Asset Management launched the second fund, Cocolife Fixed Income Fund, Inc. (CFIFI)

In 2008, CAMCI also launched the Cocolife Dollar Fund Builder, Inc. (C$FB) and in 2011, it reached a milestone when CAMCI’s total assets under management (AUM) breached the P1 billion mark. The company reached yet another milestone when Cocolife Fixed Income Fund Inc.’s total assets under management hit P2 billion in 2017. And in 2018, CAMCI celebrated its fifteenth year of operations. At the same time, the three funds also commemorated anniversaries: United Fund reaching 25 years; Cocolife Fixed Income Fund, Inc., 15 years; and Cocolife Dollar Fund Builder Inc., ten years.

In an exclusive interview with International Finance, Artemio A. Tanchoco Jr., President, and Mirasol Z. Sanchez, Senior Manager and Head of Portfolio Management at Cocolife Asset Management Company Inc., explained how the company’s funds achieved their leadership positions in the Philippines asset management market, its investment strategy, and its outlook for the Philippines market.

 

International Finance: Could you please tell us more about Cocolife Asset Management’s investment strategy?

Artemio A. Tanchoco Jr. and Mirasol Z. Sanchez: In general, our investment strategy is to stay long enough to weather the inevitable ups and downs of the market. Nevertheless, it also depends on the objective of the funds we are managing. For our equity fund, our strategy is to trade the volatility of the stock market and employ stock selection and allocation. For our fixed income fund, the company is keen on maintaining its accrual-based investments so as to minimise the impact of interest rate volatility, consistent with its policy to preserve capital.

How have Cocolife Asset Management’s key funds performed over ten, five and one years?

Cocolife Asset Management’s mutual funds have shown their resilience over the past years, overcoming the extreme volatility in the mutual fund industry and the financial markets as a whole. The funds under its management have historically yielded superior returns since their inception. In fact, they won individual recognitions for their 2018 performances in terms of one-year, three-year, five-year, and ten-year returns.

Notably, CFIFI topped the rankings of peso-denominated bond funds as it garnered first place in all the one-year, three-year, and five-year return categories, surpassing ten other competing funds in the industry. UFI was also awarded third place for the one-year return category of the peso-denominated equity funds. Likewise, it placed second for both three-year and five-year returns. C$FB, meanwhile, bagged first place for the one-year, five-year and ten-year return categories, displaying excellence in the dollar-denominated balanced funds category.

 

Could you please tell us more about the performance of Cocolife’s Peso denominated equity fund and Cocolife Fixed Income Fund and how they have delivered value to customers over time?

In the previous years, United Fund, Inc. (equity fund) was a ‘lag¬gard’ among the company’s funds. But we have already corrected our strategy. We made alterations to our stock selection strategy to be at par with the index in terms of sectoral and company weight. This strategy was aimed at minimising the deviation between the index and fund’s performance. True enough, the management’s strategy shift did bode well for the fund, as UFI’s performance in the past five years was in synch with the local index. In fact, UFI has even outperformed the local market.

Tagged as the ‘consistently consistent fund’, Cocolife Fixed Income Fund, Inc. (CFIFI) topped the ranking of the peso bond funds in the Philippine Investments Funds Association (PIFA) rankings under one-year, three-year and five-year categories, notably for two consecutive years now. Also, since 2014, the fund has been the leader in the one-year performance ranking as it continues to keep hold of the first spot.

Furthermore, the fund has been awarded by international bodies including the International Finance and Thomson Reuters Lipper Fund as the best peso fixed income fund in the Philippines.

 

What is Cocolife Asset Management’s investment focus for the next year?

Cocolife Asset Management shares the responsibility of helping the Filipino people become financially strong and sound through financial education and financial solutions. The company plays a vital role in the capital markets and the Philippine economy, especially in mobilising resources and channeling investments to help drive inclusive growth and prosperity for the nation.

Cocolife Asset Management has been taking part in the industry-wide efforts to improve the financial literacy of Filipinos. It conducts financial literacy campaigns all year round targeted at specific groups of individuals, such as overseas Filipino workers and graduating college students.

Cocolife Asset Management strongly believes that good stewardship is a good business practice. The company is guided by the principle of empathy, putting it into practice by making its services personalised. The company seeks to understand what the specific needs and requirements of its clients are and tries to provide them in ways that will meet their budgets.

Over the years, Cocolife Asset Management has grown to be one of the leading asset management companies in the Philippines, committed to providing customer service of the highest standards along with quality investment advisory services, putting Filipinos on a path to wealth-building and prosperity.

Moving forward, the company will continue to uphold its vision “leading the way toward financial freedom”.

 

What is your outlook for the stock market in the Philippines for in the short term and what are the factors that could influence the stock market’s performance in the short term?

For the Philippine stock market, 2020 will most likely be another challenging year in the backdrop of heightened regulatory risk tied with the political factors in the local front. This overhang could continue especially in the short-term, although a few surprises, such as the GDP’s potential outperformance and benign inflation data in the first half of 2020 could provide momentary relief to Philippine equities.

Overseas, trade and global growth uncertainties could serve as market drags especially on emerging markets like the Philippines. Thus, in this scenario, we can infer that the trading circumstances may be difficult, but opportunities will still be available since the recent correction wave has pushed valuations to attractive levels.

 

Which sectors are likely to outperform in the next year in the Philippines market?

Given the potential cuts in local interest rates and required reserves for banks, we are looking at the banking sector as the bright spot in the Philippine stock market. The property sector could also be on the positive side, although this could be balanced out in case the unsolved POGO issue and slowdown in office take-ups resurfaces.

For consumer stocks (food, beverage and retail), earnings could recover but will be tamed by headwinds such as tight competition and price shocks. Regulatory issues will most likely keep power and utility companies at bay, with related conglomerates being on the tail-end of uncertainties.

 

What is your outlook for the stock market in the Philippines for the long term and what are the factors that could affect the stock market’s performance in the long term?

For the long-term, our view on the local stock market is tied with out optimistic view on the Philippine economy. Currently, infrastructure projects are being rolled out, regulations are being improved, and the foundation for sustainable growth is being set through structural reforms.

We are also on the eleventh year of a bull run that commenced in March 2009, and as of March 23, the ten-year return of the PSEi is at 160 percent. It has also weathered the changes of the times, including the Fed’s winding down of its asset purchases, geopolitical tensions, and slowing global growth concerns. Therefore, we think that as long as the Philippine growth story is intact, the PSEi will continue to deliver.

 

What is your outlook for the debt funds in the Philippines in a three to five-year horizon and what are the factors that could affect the performance of debt funds in that horizon?

We maintain our bullish view on the fixed income market for the next three to five years as the benign inflation provides leeway for more accommodative policy. We expect the BSP to cut policy rates at least twice in 2020 and RRR between 200bps to 400bps, in line with the BSP’s target of single-digit RRR by 2023.  Likewise, policy tightening pressures externally have been showing signs of moderation, particularly the dovish statements from the world’s largest market.  We expect a dovish move from the Federal Reserve in 2020, with another rate cut on the horizon.

 

Will the PSEi breach 9000 levels in 2020? If so, why?

With earnings catching up, valuations looking attractive and GDP appearing to be at a stable level, a revisit of the 9,000-level is not a far-fetched idea.  Listed corporations appeared to have faced growing pains this 2019, and we will see recoveries across these sectors this coming year, as bottlenecks are addressed. We believe valuations will play a key role in bringing the PSEi back near its all-time high. At 9,000, the PSEi will most likely trade within its 10-year historical average of 17 times.

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