Built for the distance and the terrain

Three decades is a significant milestone for a fund to achieve. It means that investors have trusted such a fund with their savings through the full sweep of market conditions: the years that made investing feel easy, and the ones that made staying invested feel like the hardest thing to do. This year, our first two funds aimed at individual investors, Coronation Balanced Plus and Coronation Equity, turn 30, and it is worth reflecting on what made their track records possible.

THE SAME COMPASS SINCE 1993

When Coronation launched in 1993, the investment philosophy that would eventually power both funds was already being put to work for institutional clients. A few years later, we made that same thinking available to South African households through collective investment schemes when we launched our management company in 1996.

That investment philosophy has never changed. Long-term, valuation-driven, and built on the strength of our own research. Over these years, this has meant forming our own views, challenging our own assumptions, and investing when the price makes sense over the long run, as opposed to when something is popular.

The same thinking that drives every stock pick in the Equity Fund also drives every asset allocation decision in Balanced Plus. In a competitive and increasingly inefficient market, a consistent and research-driven approach might seem old-fashioned, but we see it as a structural advantage. It has always been our anchor, and thirty years on, experience has reinforced it at every turn.

BUILT FOR EVERY KIND OF TERRAIN

Balanced Plus, today Coronation's largest fund (and second largest in the country), with approximately R140 billion in assets, was designed with one destination in mind: retirement. A multi-decade expedition across bull and bear markets, political turbulence, currency swings, and periodic global upheaval. Like a well-kitted overlander, it carries everything a retirement saver may need: growth assets to cover ground, income assets to absorb the bumps, and experienced navigators who adjust and adapt as the terrain demands.

The ‘map’ has grown considerably along the way. In 1995, South African retirement savers received their first taste of offshore investing through a modest 5% allowance. By 2022, that had expanded to 45%, fundamentally changing what was possible for a fund like this, and demanding more from its managers than simply moving money offshore. Coronation had been building that capability for more than a decade before the regulation changed, which meant that when the map got bigger, the navigation for Balanced Plus was already in place.

CONSIDER WHAT THIRTY YEARS OF THAT TERRAIN ACTUALLY REPRESENTS

Contributing from your mid-twenties to your mid-sixties, then drawing down capital through retirement into your mid-eighties represents a six-decade journey. Coronation Balanced Plus and Coronation Equity have now covered half of it. To put their longevity in perspective, more than 80% of the balanced and equity funds that existed when these two funds launched in 1996 are no longer around today¹. Of those that have survived, Balanced Plus is one of only four balanced funds and Coronation Equity one of only seven equity funds with a track record of 30 years or more. Reaching this point, with a consistent philosophy and a no.1 ranking* in each respective category since inception, is not something that happens by accident.

Coronation Equity, the growth engine inside Balanced Plus, has been on the same road since 1996. One investor's experience shows what that has meant in practice. On 8 May 1996, she entrusted R10 000 to the Equity Fund through her adviser. For twenty-seven years, through every crisis this country and the world produced, she did not touch it. By January 2023, that R10 000 had become R378 000, 37 times the original investment. Then life happened, requiring her to withdraw a total of R310 000 over two years. By the end of last year, she still had R140 000 invested, meaning that from a single R10 000 investment she had derived R450 000 in total value (after all fees), made possible by the power of compounding over multiple decades and by good advice to stay invested through the difficult stretches.

For those who stayed the course since day one, the Equity Fund has grown an initial investment 59 times (net of fees), almost double the average return of its peers. Balanced Plus has multiplied an initial investment at inception 44 times (net of fees), 1.4 times the peer group average. These are outcomes we are proud of and a reflection of the trust that clients and their advisers have placed in us over a long time.

As we noted in our prior edition of Corospondent, thirty years is long enough to see the true magic of compounding become a reality.

A JOURNEY TAKEN TOGETHER

To the clients who have been with us for decades, and to those who joined more recently, we would like to thank you. The returns these funds have delivered belong as much to your patience and discipline as to our investment and allocation decisions. Good advice played its part too, and we are grateful to the advisers who helped clients stay the course when the road was rough. That kind of steadiness is not a small thing, and we do not take it for granted.

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