This article was originally published by CityWire In the latest of the series of interviews with industry veterans, Stephen Cranston talks to Neville Chester, a senior Coronation portfolio manager.
Back in 2005, Neville Chester and Karl Leinberger came to the rescue of Coronation Fund Managers. They took senior portfolio management jobs when the firm experienced a walkout. Morne Marais, Melanie Stockigt and Rob Oellermann left to form Tantalum Capital.
They are still there today. Chester has just chalked up 25 years’ experience in asset management, but he is happy to let Leinberger fulfil the CIO role.
‘Karl is better at the people management, and I prefer to spend as much time as I can running the money.’
Chester’s two main funds are in the top quartile over the three years ended February 2022. The Coronation Top 20 fund is 31st out of 189 funds in the South African general equity category with a 15.6% annualised return, according to Morningstar. The Coronation Market Plus fund is 20th out of 95 funds in the worldwide multi-asset flexible category with a 12.3% annual return, according to Morningstar.
‘But we have one investment process at Coronation. All our funds have the Coronation DNA,’ said Chester.
‘If we have a good idea, we share it across the firm. Every idea has to be debated by the full team, and even the most junior analysts are encouraged to shoot holes in them.’
He said that was less true before the ‘new’ Coronation formed in 2005.
‘Powerful portfolio managers such as Morne Marais, Louis Stassen and Walter Aylett operated within their silos before that.’
Chester is a chartered accountant, but during articles at KPMG, he realised that he was not cut out to be an auditor.
‘It was the mid-1990s, and I had audited several life insurance and reinsurance businesses. It was an interesting time as the demutualisation of Old Mutual and Sanlam was approaching.’
In 1997, Chester joined Old Mutual Asset Managers as a financial analyst, where he worked with the legendary Kokkie Kooyman, who now runs the Denker Global Financial fund.
‘He is a phenomenon with an incredible work ethic and a humble approach.’
But in less than two years, the Old Mutual CIO Bryan Hopkins took a team with him to form Velocity Asset Management, backed by PSG’s Jannie Mouton.
‘As a junior analyst, I was prepared to take the risk and move. Some strong young professionals came too, such as Delphine Govender (now CIO of Perpetua Asset Management), Malcolm Charles (a senior fixed income manager at Ninety One) and Mark le Roux (later head of fixed income at Coronation).’
But the timing wasn’t good. Velocity was a growth house that launched just when growth shares fell out of fashion after the 1998 small-cap crash. The business was sold to African Harvest, but Chester did not go with the business. Instead, he joined his mentor Kooyman at Coronation.
‘Four of us joined Coronation on the same day, August 1, 2000. It was myself, Karl, Gavin Joubert, who now runs the Coronation Global Emerging Markets fund, and Kirshni Totaram, who took over from Magda Wierzycka as head of the institutional development team.’
Chester says it is a huge competitive advantage for Coronation that two former CIOs, Stassen and Tony Gibson, are still working at the organisation. Charles de Kock, who is a former Old Mutual CIO, also works at Coronation. All three can serve as sounding boards for the fund manager’s staff.
‘They have experienced stagflation in their lives, which is very helpful now that it seems to be coming back.’
Chester says that Coronation has taken a different approach from its archrival Ninety One.
‘We have always had a strong emphasis on keeping costs down, and our range of products focused. We have not strayed from pure asset management into running platforms.
‘But our friends at Ninety One have taken more of a “build it, and they will come” approach.’
‘They have a large international business, and we have chosen to run global products from Cape Town. Our Global Emerging Markets fund has been successful as well as our Africa fund.’
Chester says there is no doubt that Coronation is a mature business in a small market with a shrinking savings sector.
‘But our model has never been to focus on asset growth. We closed our main funds to new business in 2013 for a while to maintain our ability to generate alpha.’
Chester said that as the landscape becomes more competitive, Coronation might see further outflows.
‘We are sometimes considered everyone’s default manager. We wish we were.’