Which fund is right for you? - August 2020

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Coronation Insights

Coronation Insights

Invest offshore with us in rands or in dollars

Investors have different ways through which to gain international exposure with Coronation. Most of our flagship domestic multi-asset funds already have a considerable international allocation, which consists of direct offshore exposure and indirect offshore exposure (i.e. the portion of the value we place on local shares that derives from economic activity outside of South Africa). The effective rand-hedge exposure of our Balanced Plus and Market Plus funds, which have long-term growth objectives, are typically more than 50% of the portfolio. For the more conservative Capital Plus and Balanced Defensive funds, which have near-term capital preservation targets in rands, the range is somewhat lower. Each of these funds provide the easiest way to gain hassle-free international exposure, as you mandate us to manage the scope of the international allocation on your behalf. We also offer a range of funds (rand-denominated or foreign-domiciled) that are invested in global markets. Below we discuss these options in more detail.

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Pension funds that are subject to regulatory limits are currently allowed a maximum offshore allocation of 30% (with an additional 10% in other African markets). This level of exposure to offshore assets may be sufficient for investors with the above-mentioned needs. Our domestic multi-asset funds (Coronation Balanced Plus, Coronation Capital Plus and Coronation Balanced Defensive) are mandated to hold the maximum allowable offshore allocation on behalf of investors.

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We offer two multi-asset funds optimised for long-term discretionary investors who are not subject to retirement fund investment restrictions. Coronation Market Plus can invest up to 40% offshore, while investors requiring an unconstrained mandate can consider Coronation Optimum Growth (as detailed on page 10). The Fund will typically invest between 50% and 90% of its portfolio in international assets. Coronation Optimum Growth truly celebrates active investing. Its ability to invest in any listed asset from anywhere in the world benefits from the breadth and depth of our global investment team covering equities, bonds and property across the domestic, international developed, emerging and frontier markets. While it is an equity-centric solution, allocation to other asset classes will be informed by valuations. The Fund does not target a specific asset allocation.

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Investors requiring more international exposure than is achievable by way of a domestic or worldwide flexible multi-asset fund (discussed before), can use their non-retirement savings to invest in a rand-denominated international fund. The reality is that by living, working and owning a home in South Africa, you already have significant country-specific risk, arguing for additional international exposure.

Our rand-denominated funds allocate all or most assets to international investments, while remaining easy to use and access, as the funds are established in South Africa. However, while they provide full economic diversification, they still operate under the laws of South Africa and therefore do not diversify jurisdictional risk [1].

If you have a substantial amount to invest offshore, you can externalise your rands and invest in a fund incorporated in another country, most often in the EU. In this case, the laws of the country of incorporation govern your investment.

Coronation offers a range of funds incorporated in Ireland with the same underlying market exposure as our rand-denominated international funds, but with the added benefit of jurisdictional diversification.

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[1] One example of jurisdictional risk is that South Africa still enforces exchange controls, which limit the amount that asset managers can invest outside South Africa on behalf of clients. The current limits are 30% globally and 10% in the rest of Africa for retirement fund investors, and 40% globally and 10% in the rest of Africa for discretionary investors.