Quarterly Publication - July 2016
Notes From My Inbox - July 2016
Britain’s vote to leave the EU, which was not anticipated by financial markets, was the defining event of the past quarter. While it will take time for the uncertainties raised by Brexit to be settled, the market tends to shoot first and ask questions later. Inevitably, the initial response to the event included a derating of the assets most likely to be impacted by the UK’s probable loss of access to the common market area and a knee-jerk flight to the perceived safety of government bonds. Incredibly, this search for safe havens has led to a further increase in government debt with a negative yield, which now amounts to $11.7 trillion.
We expect the markets to remain unsettled for some time because Brexit happened against the backdrop of low and slowing global growth. As always, our focus remains on the long term and on identifying investments that are trading at a discount to their long-term business value. Unsettled markets create more of these opportunities, which should over time aid us in delivering long-term outperformance in your funds. We certainly do not believe investors will achieve compelling returns by slavishly following erratic market sentiment.
Marking 20 years of delivery
We reached a major milestone during the quarter, with the 20th anniversary of the launch dates of our first two funds, Coronation Equity and Balanced Plus. Both funds have added significant value over this period. You can read more about the experiences of investors who have been with us for most of this time here. Our belief in a team-based approach to investing was a significant contributor to the good outcomes that these funds have delivered over time. We have always avoided the creation of specialist silos where investment decisions are made in a vacuum. Our entire investment team of more than 60 individuals – covering the South African, Global Emerging, Global Developed and Frontier markets – sit together in an open-plan office. They are constantly interacting and exchanging investment information.
Also, our analysts and fund managers are each allocated a wide range of research responsibilities, across different industries and countries. Our investment professionals can price profit and risk across asset classes, sectors and geographies. We believe this broader perspective builds better investors, drives better debate and results in better investment decisions. Our teambased and generalist approach has contributed to the stability of our investment process. With analysts covering a wide range of companies in different sectors, there are no gaps in research coverage in the event of occasional departures from the team. We believe this commitment to sustainability will contribute to the delivery of continuing superior investment results in the decades to come.
In this edition
This issue of Corospondent offers extensive analysis of how the recent political events have impacted the markets. Our economist Marie Antelme explains the larger implications of Brexit, while Neville Chester provides more on the immediate market repercussions. Pallavi Ambekar details our investment case for MTN, which is showing signs of recovery after a tough period, while Iakovos Mekios gives our assessment of the Mexican investment landscape following a recent visit. Also in this edition, Greg Longe discusses the prospects of Nigeria, which is suffering from chronic balance of payment problems, and Steven Barber examines the long-term prospects of a global pharmacy giant.
We hope you enjoy the read.