In July, we marked the 20-year anniversaries of two of our domestic multi-asset class funds aimed at investors with specific longer-term goals. Looking back on their track records today gives us an opportunity to reflect on how the quality of our thinking, which influences the decisions we make in constructing these portfolios, has resulted in exceptional outcomes for our clients over these years.
More than double inflation for retirees
Investors in, or near, retirement need to achieve two outcomes simultaneously – capital growth and protection against downside risk. This means that they are seeking inflation-beating returns but delivered in a manner that doesn’t expose their capital to the full impact of severe market corrections.
For the past two decades, has delivered on this dual need by producing returns that are well ahead of its inflation +4% benchmark. In fact, an investment at launch would have resulted in more than double that of inflation over the 20-year period, while at the same time being consciously managed to minimise downside risk.
What does this mean in practice?
An investor who started off with an income drawdown of 5% per year (in line with industry guidelines for those aged 65) at the Fund’s inception in July 2001, saw an increase in their nominal capital of more than three times over the last two decades, while enabling a cumulative drawdown of more than 2.3 times their initial capital over that same period.
This means that for every R1 million invested in Coronation Capital Plus 20 years ago, your investment would be worth R3.4 million (as at end July 2021), even after withdrawing R2.3 million in income*.
Better than the market and average balanced fund
Discretionary investors (those with the ability to invest beyond what they are saving for their retirement) may require a fund that can express views beyond the constraints of Regulation 28 – and rightly expect such a solution to outperform a traditional balanced fund.
If managed well, such a fund can even provide a return that is close to, or in line with, the market but with the added benefit of diversification that results in a less volatile experience than that of a pure equity fund.
Enter Coronation Market Plus
Since its inception in 2001, Coronation Market Plus has met the needs of aggressive investors aiming to build long-term capital outside of their retirement portfolios. With the ability to invest more than the Regulation 28 limits of 75% in equities and 30% offshore, Coronation Market Plus has delivered an annualised return of 14.9% compared to the quantitative benchmark return of 13.2% and the median balanced fund return of 11.4%.
What is particularly pleasing is that, over this period, despite never being fully invested in equities, Coronation Market Plus has also managed to outperform the JSE All Share Index’s performance of 14.0%. With an objective to grow real capital over time, the Fund delivered an annualised real return of 9.3% p.a.
Two decades of adding value to our clients
There are few funds in South Africa with track records that span two decades. There are even fewer that have achieved their stated objectives. This makes it incredibly rewarding to see how we have delivered competitive long-term returns for our clients in these two mandates through active management within a multi-asset class portfolio. We will continue to work tirelessly to earn the trust of our clients in our multi-decade journey together.
Coronation is an authorised financial services provider.
*The value of R1m invested in Coronation Capital Plus at inception through to 31 July 2021. It assumes an initial drawdown rate of 5% per year set at inception and income calculated on each anniversary.