Investment flows in line with the market; Coronation positive on future returns
26 May 2020
- Assets under management: R508 billion
- Diluted headline earnings per share: 178.3 cents
- Interim dividend per share: 178.0 cents
Cape Town, 26 May 2020 – Long-term valuation-driven asset manager Coronation Fund Managers today announced its interim results for the six months to end-March 2020.
The Covid-19 pandemic has impacted financial markets with a swiftness and ferocity normally only seen in a classic financial crisis, pushing the world economy into a recession. In South Africa, although the initial early response to controlling the virus should be commended, it is evident that the huge economic cost of the lockdown has already exacted a very hefty toll on our country. As we shift to Level 3 on 1 June, we will continue to engage in discussions to responsibly reopen the economy, while keeping the health and safety of citizens top of mind.
Said CEO Anton Pillay, ‘While it is impossible to ignore the immediacy, depth and duration of the economic impact, a very real human tragedy sits at the heart of these extraordinary times. Our sympathies go out to the families and loved ones of those who have lost their lives to the virus. The healthcare and essential services workers who have worked tirelessly under extremely stressful conditions to prepare South Africa for peak infection and to keep the country operational cannot be thanked enough.’
AUM AND FLOWS IN LINE WITH THE MARKET
‘Despite this unparalleled environment, Coronation’s revenue is up 8% to R1.8 billion and net profit is up 8% year on year from end-March 2019. This can be attributed to improved relative short-term performance in our portfolios and tight cost control,’ said Pillay. ‘While short-term performance is encouraging, especially within the domestic and global equity portfolios, the long-term performance across portfolios remains excellent.’
From a market perspective, over the six months to end-March, the key asset classes included in Coronation’s client portfolios were down, with the FTSE/JSE All Share Index declining 17.7% and the All Bond Index down 7.1%, while the MSCI All Country World Index and MSCI Emerging Markets Index returned 0.3% and 0.8% in rands, respectively.
Reflecting these poor market conditions, Coronation’s total AUM were down 11% over the reporting period, while average AUM remained flat year on year. ‘Net outflows of 3.8% of the opening balance mirror those of the broader asset management industry, as the already-shrinking pool of formal savers in South Africa comes under further pressure due to the sudden loss of many household incomes, savings being accessed and retirement contributions temporarily being stayed.'
COVID-19 CRISIS RESPONSE
Coronation is a large independent asset manager and custodian of the savings of millions of South Africans, as well as several international retirement funds, endowments and family offices. This is a responsibility that we take very seriously. Pillay stated, ‘As an enabling service, Coronation remains fully operational during the national lockdown, with approximately 85% of our employees working seamlessly from home to uphold our commitments to clients. However, we are very aware of the extraordinarily tough business environment, and the staggering economic impact of the lockdown.
In response, we have pledged both corporate and individual (approximately 30% of Coronation employees and our non-executive directors) contributions to the Solidarity Fund and other non-profit organisations totalling over R10 million.’
Coronation has provided support to our service providers, including small- and medium-sized businesses with whom we do business, and has worked with our partners to implement community support initiatives, such as feeding schemes.’
In addition, we are an active participant in industry engagements to find solutions to mitigate the effects of Covid-19 and the lockdown on the South African economy and its citizens, with the aim of supporting the stability and orderly functioning of domestic financial markets.
LONG-TERM, ACTIVE MANAGEMENT KEY IN TURBULENT TIMES
‘No one could have foreseen the possibility of, or prepared for, the havoc that the Covid-19 virus would unleash on a global scale in the first quarter of 2020. These are extraordinary times, and with so many unknowns and no immediate solutions, large-scale uncertainty persists in the global economy,’ said Pillay.
‘We firmly believe that active management has a significant role to play, not only in mitigating both sector- and stock- specific risks; but, our proprietary research and valuation-driven investment approach will assist us in identifying investments that are resilient and offer the best upside potential for our clients’ portfolios.’
While it is too early to forecast outcomes, Coronation is mostly positive on expected returns from current levels.
Coronation remains fully operational and we will continue to manage the business for the benefit of all stakeholders, and in so doing ensuring that we are able to continue to contribute positively to the country and its citizens.
Analyst enquiries: Johannes van Niekerk, CapitalVoice
082 921 9110
Media enquiries: Fiona Kalk, Coronation
021 680 2584
Our institutional business manages R292 billion (September 2019: R331 billion) on behalf of our South African and global institutional clients.
South African clients
We continue to manage a meaningful share of assets in the local pension fund industry, representing a total AUM of R224 billion (September 2019: R265 billion), making us one of the largest independent managers of pension assets in the country. Net outflows over the reporting period represented 5,8% of our opening balance for local institutional assets.
We manage a total of R68 billion (September 2019: R66 billion) in our global strategies on behalf of leading international retirement funds, endowments and family offices. For the reporting period, net outflows were marginal, representing 0.2% of our opening global AUM
With retail assets totalling R216 billion (September 2019: R240 billion), we are a leading independent manager of South Africa’s household savings and investment pool. We experienced net outflows of 2.5% of our opening balance (September 2019: 5.4%), broadly in line with retail investment industry experience.
As one of the largest independent asset managers in South Africa, we invest the long-term savings of millions of South Africans. Our clients include individuals, retirement funds, medical schemes and financial institutions. We also manage assets for several leading international retirement funds, endowments and family offices. Our core objective is to deliver investment excellence, which is underpinned by five focus areas, namely: excellent long-term performance, building a global franchise, world-class client service, active corporate citizenship, and effective governance. Our culture and values are important factors in delivering on our commitment to be responsible stewards of our clients’ assets, and we understand that we have been granted a social licence to operate. We earn this in the way in which we invest and in the way in which we operate. We achieve this through considering environmental, social and governance (ESG) factors in our investment decision-making process, our corporate citizenry and corporate social investment projects.
Disclaimer: Any information being provided herein (the “Information”) is not designed for use in any jurisdiction or location where the publication or availability of the Information would be contrary to local law or regulation. If you have access to the Information it is your responsibility to be aware of and to observe all applicable laws and regulations of any relevant jurisdiction and it is recommended an investor first obtain appropriate legal, tax, investment or other professional advice prior to acting upon the Information. Coronation Asset Management (Pty) Limited, Coronation Investment Management International (Pty) Limited and Coronation Alternative Investment Managers (Pty) Limited are authorised Financial Services Providers regulated by the Financial Sector Conduct Authority of South Africa. Coronation Asset Management (Pty) Limited, Coronation Investment Management International (Pty) Limited and Coronation Alternative Investment Managers (Pty) Limited are subsidiary companies of Coronation Fund Managers Ltd, a company incorporated in South Africa and listed on the JSE (ISIN: ZAE000047353). The Information is for information purposes only and does not constitute or form part of any offer to the public to issue or sell, or any solicitation of any offer to subscribe for or purchase an investment, nor shall it or the fact of its distribution form the basis of, or be relied upon in connection with, any contract for investment. Unit trusts should be considered a medium- to long-term investment. The value of units may go down as well as up and is therefore not guaranteed. Past performance is not necessarily an indication of future performance. Note that individual investor performance may differ as a result of the actual investment date, the date of reinvestment of distributions and dividend withholding tax, where applicable. Where foreign securities are included in a fund it may be exposed to macroeconomic, settlement, political, tax, reporting or illiquidity risk factors that may be different to similar investments in the South African markets. Fluctuations or movements in exchange rates may cause the value of underlying investments to go up or down. Coronation Management Company (RF) (Pty) Ltd is a Collective Investment Schemes Manager approved by the Financial Sector Conduct Authority in terms of the Collective Investment Schemes Control Act. Unit trusts are traded at ruling prices set on every trading day. Unit trusts are allowed to engage in scrip lending and borrowing. Coronation Fund Managers Limited is a Full member of the Association for Savings & Investment SA (ASISA).Opinions expressed in this document may be changed without notice at any time after publication. Nothing in this document shall constitute advice on the merits of buying and selling an investment.