A T R A D I T I O N I N V E ST I N G EXCELLENCE

Transcription

1 A T R A D I T I O N OF I N V E ST I N G EXCELLENCE

2 F O U N D E D 1949

3 Founded in 1949, Cooke & Bieler has evolved from a local investment firm into an institutional and private wealth manager with an international client base and several billion dollars in assets under management. Our firm s long history gives us a perspective often lacking in the investment management industry. The tenets of our philosophy that fundamentals drive stock prices, that capital preservation improves returns and that a firm s culture shapes its decisions represent the distilled wisdom of four generations of investment professionals. This wisdom has been earned over more than half a century of investment excellence and tested in good times and bad.

4 L O U I S B I E L E R S V I S I O N Louis Bieler Jay Cooke When Louis Bieler founded his investment firm in 1949 he already had a keen understanding of risk. After graduating from Princeton University, he served as an artillery officer in World War I and rose to head Germantown Bank as it navigated through the Great Depression. These experiences underpinned the conservative approach Bieler brought to investing, an approach valued by his wealthy, but Depression-scarred clients. These experiences also naturally led to Cooke & Bieler s persistent focus on quality businesses. Two years later in 1951, Bieler set the enduring tone of Cooke & Bieler s culture when he recruited Jay Cooke to join the firm. The men were superficially similar. Both were Princeton graduates and war veterans, with Cooke serving in both World Wars and even sustaining injury at the invasion of Normandy. However, the two men had very different personalities. Bieler was analytic and reserved, while Cooke was affable and social. Active in Republican politics, Cooke was the grandson of the famous Civil War financier of the same name and had deep roots among the wealthy Philadelphians that comprised the firm s core clientele in its early days. Instantly recognizing Cooke had strengths he lacked, Bieler positioned Cooke s name first on the letterhead and established Cooke as the face of the firm. Thus began a long tradition of placing the interests of the firm and its clients ahead of public recognition. A long tradition of placing the interests of the firm and its clients ahead of public recognition.

5 Its embryonic culture in place and with a growing list of clients, Cooke & Bieler was a pioneer in fundamental research, which continues to be the hallmark of the firm s investment process. Bob Simpson, Jim McClennen and Jim Stratton joined the firm as equity analysts in the late 1950s and early 1960s and established the intense research focus that has continued ever since. In fact, the group is widely credited as being among the first in the industry to emphasize management meetings as a core component of the equity research process. Through the 1960s, Cooke & Bieler continued to evolve, adding a focus on institutional accounts to its traditional business with wealthy families. It also continued to expand its research capabilities. By the time Bieler retired in 1969, the firm had achieved a long record of investment success and accumulated an impressive list of clients, with assets under management having grown to $350 million. Bieler also left behind an even rarer achievement: a team of seasoned professionals able to carry on the work he started. He had created an institution. L to R W. Robert Simpson James C. A. McClennen Robert B. Arthur S T I C K I N G T O O U R K N I T T I N GThe 1960s and early 1970s saw the arrival of analysts Bob Arthur, Russell Redenbaugh, Wally Grant, Bob Brooks and Ed Haldeman, as well as high net worth portfolio managers Roffe Wike and John Medveckis. However, this new generation soon faced its own set of challenges. When Louis Bieler retired, Cooke & Bieler was sold to Virginia-based insurance

6 company, the Richmond Corporation. Not long after and just in time for the brutal bear market of the partner group repurchased the firm. With equity markets down more than 40%, the investment team returned to the lessons learned by Bieler forty years earlier, formally incorporating another hallmark of Cooke & Bieler investing: a focus on minimizing risk. The investment team increased Another hallmark the number of portfolio holdings to improve of Cooke & Bieler diversification, increased the average market investing: capitalization of the portfolio s companies and a focus on redoubled their emphasis on balance sheet strength. minimizing risk. These changes proved effective, helping Cooke & Bieler navigate the next 25 years which included two notable market collapses. The first of these, the collapse of the oil bubble in the early 1980s, was a significant test of Cooke & Bieler s fully-formed high quality, low risk investment approach. As the oil bubble inflated, many clients became unhappy with Cooke & Bieler s underweight position in Energy holdings, offering the firm its first taste of benchmark risk. When the bubble burst, Cooke & Bieler s portfolio benefited from its positioning, but with indirect exposure to oil throughout, did not escape entirely unscathed. Going forward, the investment team, which now included Kermit Eck, became more cognizant of such indirect exposure. More importantly, though, the incident further solidified their commitment to bottom-up research and company-specific fundamentals, even if it resulted in significant differences

7 from the benchmark. More committed than ever to its research approach, the firm grew steadily between the mid-1980s and 1990s, adding three new portfolio managers, Jamie O Neil, Mike Meyer and Mehul Trivedi. Over the same period, assets under management grew from approximately $2 billion to $6 billion. By the late 1990s, the institutional lessons of the preceding decades remained firmly intact. Many of the team members had not lived through previous periods of turmoil at Cooke & Bieler, but as the technology bubble inflated, the firm s disciplined philosophy nevertheless prepared them for the difficult decisions such periods require. Not surprisingly, in the face of soaring valuations, the firm saw client attrition and faced questions as to the viability of its conservative investment approach. However, the investment team stood by its fundamental research, emboldened by the lessons learned during the oil bubble. Their resolve paid off. In 2000 and 2001, years in which the S&P 500 Index declined by roughly 20% cumulatively, the benefits of a differentiated positioning once again became obvious to equity investors. Cooke & Bieler saw its assets under management double over the course of the next five years. L to R Russell G. Redenbaugh Walter W. Grant Robert T. Brooks Charles E. Haldeman, Jr. J. Roffe Wike, II John J. Medveckis As the technology bubble inflated, the firm s disciplined philosophy prepared it for the difficult decisions such periods require.

8 B U I L D I N G A N E N D U R I N G I N S T I T U T I O N Along with the evolution of its investment philosophy and process, Cooke & Bieler continued to develop as an organization as well. As the industry matured, new roles emerged within the firm and its ownership structure changed. Throughout each of these transitions, the partner group remained focused on the long-run stability and success of the firm. The early 1970s saw the formalization of Cooke & Bieler s MBA summer internship program. Over the course of the decade, portfolio managers Ed Haldeman and Kermit Eck both started full time after completing internships. Thus originated a significant source of future talent for the firm, with more than half of the current investment team having graduated from the program. Also during the 1970s, Cooke & Bieler appointed two outside directors, Robert Glauber, a professor at the Harvard Business School, and Ronald Henriksen, a corporate executive at Eli Lilly. Together, Glauber and Henriksen were responsible for overseeing partner-level performance evaluations, a system that eventually evolved into the investment team s annual peer review process. Independent ownership afforded autonomy and the firm remains employee-owned. During the 1980s, Cooke & Bieler moved toward a firm-wide uniform portfolio model and as a result also implemented a centralized trading position. This move marked a change from the previous process by which the portfolio managers individually executed trades in their clients accounts. Bruce Smith, who had earlier worked as Russell Redenbaugh s assistant, completed his MBA and rejoined as the full time trader in 1984.

9 In the late 1990s, with consultants having gained a major presence in the institutional world and industry competition intensifying, Cooke & Bieler began assembling a dedicated marketing and client service team. The first of these hires, Sam Ballam, had been a Cooke & Bieler institutional client from 1984 to Ballam was tasked with developing marketing and consulting relationships, as well as providing institutional client service. These new marketing efforts proved especially timely when, in 1998, Cooke & Bieler which had previously managed only a Large Cap Value portfolio launched its Mid Cap Value strategy. L to R Kermit S. Eck R. James O Neil Michael M. Meyer Mehul Trivedi Bruce A. Smith Samuel H. Ballam, III Cooke & Bieler s professionalization was not without its growing pains, though. Having sold the firm to United Asset Management (UAM) in 1986, Cooke & Bieler decided to once again take itself private in Value investing had fallen out of favor during the technology bubble and the partner group recognized their undervalued franchise. More importantly, though, they also recognized that what had been a long and mutually beneficial relationship with UAM no longer suited Cooke & Bieler s investment philosophy. South African insurance company Old Mutual had purchased UAM and shifted its focus to large, multi-strategy asset managers. Cooke & Bieler, still firmly committed to its investment style, wanted the operational freedom to focus solely on value investing. Independent ownership afforded them this autonomy and the firm remains employee-owned a decade later.

10 Today, Cooke & Bieler has grown to over thirty employees including investment, client service, marketing, compliance, and trading personnel, and is committed to an independent investment process. The firm now manages endowment, foundation, pension, and individual portfolios for both domestic and international clients. Through ownership transitions, industry developments, bubbles, and busts, Louis Bieler s original, founding principles have remained intact, guiding the investment process and shaping Cooke & Bieler s organizational development.

11 F O U N D E D 1949

12 1700 Market Street Suite 3222 Philadelphia, PA T F