Examine quality and persevere
Conviction Equities Boutique
State of emergency in Switzerland
In order to contain the spread of the COVID-19 virus, the Swiss Federal Council declared a state of emergency in the country on March 16 and ordered across the country the closure of all public establishments, restaurants and shops (with the exception of grocery stores, pharmacies and health facilities), a ban on events, and restrictions on public transportation and border crossings. With public life coming to a virtual standstill, the paralyzed Swiss economy is facing heavy losses. The world is at risk of sliding into a global recession as a result of the rapid global spread of the virus, which is harmful to at-risk groups, and the draconian countermeasures taken by increasing numbers of countries.
Global cutbacks have a particular impact on the Swiss economy as so many Swiss companies are heavily dependent on exports. The corona crisis has provoked a demand shock in many sectors, primarily in tourism, the hospitality industry and luxury goods. The Swiss engineering, electrical and metal industries are also now particularly at risk as global supply chains have been visibly disrupted. Many companies have already cut back working hours, leading to production bottlenecks and supply shortages.
In response to this high level of uncertainty, international equity markets have declined more rapidly and sharply in the last few days than they have in a long time. Countermeasures by central banks have not helped reassure market players. The pronounced correction is not comparable to previous crises. Unlike for example the bursting of the dot-com bubble in 2001, which wreaked havoc primarily on tech firms, or the sub-prime mortgage crisis in 2008, where financial institutions were the main victims, all sectors and industries are equally affected by the downturn this time around. This slump has not yet bottomed out and is likely to continue for as long as the news continues to provide us with a daily tally of dramatic rises in the number of cases and more emergency government measures.
Looking at other international equity markets, (as of March 17, midday), the downturn is less severe in Switzerland (down 23%) than for example in the US (down 29.5%), Japan (down 28%) and other European countries (25-35%). This is chiefly thanks to the food and drink multinational Nestlé and pharma giants Novartis and Roche, which make up around 60% of the Swiss equity market’s total capitalization, giving it a defensive nature.
Forward-looking analysis with a focus on corporate quality
We had already been preparing ourselves for a tough 2020 in the fourth quarter of 2019, with our Swiss equities portfolios adopting a more defensive approach. We trained our focus exclusively on companies with exceptionally high-quality balance sheets, management, business models, innovative strength, strategies and global market share. Almost a year ago, we stepped up our reviews of company quality. At present, we are examining balance sheets in particular in terms of debt and calculating how long this debt can be serviced with existing funds.
In January, when we first received news of the virus from China, we reduced the weightings of companies that are disproportionately dependent on the country such as the Swatch Group, Richemont, Schindler, Straumann and Logitech. Given that companies whose main activities are concentrated outside China and Asia are now also affected by the crisis, we have reduced more positions in the last few weeks, for example in ABB, AMS, Kühne + Nagel, Julius Bär, Sulzer, and UBS. Our focus now is on companies with very defensive business models: among the large caps, these include Nestlé, Roche, Novartis, Givaudan, Alcon and Swisscom, with mid and small caps including Sunrise, Emmi, Galenica, Lindt & Sprüngli, Orior, PSP, and BKW.
We are extremely close to the companies and are now running through various scenarios to calculate their impact on our valuations. We are also looking beyond the current market turbulence to the medium term for companies in all sectors and estimating which of these should be able to master or even benefit from the current situation thanks to their strategies, which could find themselves in financial difficulties or even go under due to their levels of debt, and which would particularly stand to benefit from a revival to the economy.
No change to investment strategy or horizon
Our investment decisions are solidly based on these findings, even if it is still too early for specific transactions. At present, we do not believe there is any need to take action regarding our portfolios, which we were able to protect in good time. Equity markets are liquid for the time being. Our funds have not yet recorded significant cash outflows. Nonetheless, we are prepared for the eventuality that some investors may withdraw funds. For this reason, as a precautionary measure, we are currently holding somewhat more liquidity than normal, when we are practically fully invested.
In hectic times such as these, it is of utmost importance that we do not take too much of a short-term view when making investment decisions. A few adjustments here and there will certainly be necessary, but fundamentally we are standing by our investment approach and maintaining our investment horizon of 18 to 24 months. This stood the test of past crises. Not since the start of the 1930s have there been more than five consecutive years in which Swiss equities did not achieve positive performance. Even when it proves difficult at times, as is the case now, perseverance pays off.
| Performance overview | |||
| Since the start of the year as of March 16, 2020 | Absolute | ||
| Indices (incl. dividends) | |||
| SPI (overall market) | -21.9% | ||
| SMI (Large Caps) | -22.0% | ||
| SPI Extra (Mid & Small Caps) | -26.7% | ||
| Fund | Relative | vs. | |
| Vontobel Swiss Dividend CHF A | -20.1% | 1.8% | SPI |
| Vontobel Fund (CH) – Sustainable Swiss Equity CHF I | -21.2% | 0.7% | SPI |
| Vontobel Fund – Swiss Mid and Small Cap Equity CHF I | -24.3% | 2.4% | SPI Extra |
| Vontobel Fund (CH) – Ethos Equities Swiss Mid & Small CHF A | -23.7% | 3.0% | SPI Extra |
| Raiffeisen Futura Swiss Stock I | -22.9% | -1.0% | SPI |
In absolute terms, all funds have declined since the start of the year. Nonetheless, with the exception of the Raiffeisen Futura Swiss Stock, they have outperformed their benchmark indices. Its underperformance relative to the benchmark index is due to the absence of Nestlé in the portfolio in line with the fund’s strict sustainability requirements.
Vontobel Swiss Dividend
| Fund information | |
| Fund |
Vontobel Swiss Dividend CHF A CH0002795703 |
| Index | SPI TR |
| Currency | CHF |
| Launch | 23.04.1990 |
| Period | 13.07.2007 - 29.02.2020 |
| Rolling 12-month net returns (in %) | ||
| Fund | Index | |
| 01.03.2019 - 28.02.2020 | 8.5 | 8.5 |
| 01.03.2018 - 28.02.2019 | 7.0 | 6.9 |
| 01.03.2017 - 28.02.2018 | 7.5 | 9.5 |
| 01.03.2016 - 28.02.2017 | 15.8 | 13.5 |
| 01.03.2015 - 29.02.2016 | -7.2 | -7.5 |
Past performance is not a guarantee of future performance.
Performance data does not take into account the commission or costs charged when issuing or redeeming units. Source: Vontobel Asset Management.
Vontobel Fund (CH) - Sustainable Swiss Equity
| Fund information | |
| Fund |
Vontobel Fund (CH) - Sustainable Swiss Equity CHF I CH0381683991 |
| Index | SPI TR |
| Currency | CHF |
| Auflage | 01.12.2017 |
| Period | 01.12.2017 - 29.02.2020 |
| Rolling 12-month net returns (in %) | ||
| Fund | Index | |
| 01.03.2019 - 28.02.2020 | 8.3 | 8.5 |
| 01.03.2018 - 28.02.2019 | 5.0 | 6.9 |
| 01.03.2017 - 28.02.2018 | n/a | n/a |
| 01.03.2016 - 28.02.2017 | n/a | n/a |
| 01.03.2015 - 29.02.2016 | n/a | n/a |
Past performance is not a guarantee of future performance.
Performance data does not take into account the commission or costs charged when issuing or redeeming units. Source: Vontobel Asset Management.
Vontobel Fund - Swiss Mid And Small Cap Equity
| Fund information | |
| Fund |
Vontobel Fund - Swiss Mid And Small Cap Equity CHF I LU0278085229 |
| Index | SPI Extra TR |
| Currency | CHF |
| Launch | 13.07.2007 |
| Period | 13.07.2007 - 29.02.2020 |
| Rolling 12-month net returns (in %) | ||
| Fund | Index | |
| 01.03.2019 - 28.02.2020 | 7.2 | 7.4 |
| 01.03.2018 - 28.02.2019 | -7.2 | -6.4 |
| 01.03.2017 - 28.02.2018 | 19.7 | 20.2 |
| 01.03.2016 - 28.02.2017 | 20.9 | 20.3 |
| 01.03.2015 - 29.02.2016 | 5.9 | 4.1 |
Past performance is not a guarantee of future performance.
Performance data does not take into account the commission or costs charged when issuing or redeeming units. Source: Vontobel Asset Management.
Vontobel Fund - Ethos Equities Swiss Mid & Small
| Fund information | |
| Fonds |
Vontobel Fund - Ethos Equities Swiss Mid & Small CHF A CH0023568022 |
| Index | SPI Extra |
| Currency | CHF |
| Launch | 01.12.2017 |
| Period | 01.12.2017 - 29.02.2020 |
| Rolling 12-month net returns (in %) | ||
| Fund | Index | |
| 01.03.2019 - 28.02.2020 | 10.69 | 7.40 |
| 01.03.2018 - 28.02.2019 | -4.27 | -6.44 |
| 01.03.2017 - 28.02.2018 | 20.77 | 20.18 |
| 01.03.2016 - 28.02.2017 | 21.98 | 20.34 |
| 01.03.2015 - 29.02.2016 | 6.37 | 4.06 |
Past performance is not a guarantee of future performance.
Performance data does not take into account the commission or costs charged when issuing or redeeming units. Source: Vontobel Asset Management.
Raiffeisen Futura Swiss Stock
| Fund information | |
| Fund |
Raiffeisen Futura Swiss Stock CHF I CH0236666811 |
| Index | Swiss Performance Index TR |
| Currency | CHF |
| Launch | 03.03.2014 |
| Period | 03.03.2014 - 29.02.2020 |
| Rolling 12-month net returns (in %) | ||
| Fund | Index | |
| 01.03.2019 - 28.02.2020 | 9.29 | 8.51 |
| 01.03.2018 - 28.02.2019 | 3.42 | 6.88 |
| 01.03.2017 - 28.02.2018 | 12.32 | 9.52 |
| 01.03.2016 - 28.02.2017 | 17.58 | 13.55 |
| 01.03.2015 - 29.02.2016 | -2.00 | -.754 |
Past performance is not a guarantee of future performance.
Performance data does not take into account the commission or costs charged when issuing or redeeming units. Source: Vontobel Asset Management.
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