Coronation more positive on prospects for second half of financial year
21 May 2019
- Assets under management of R586 million
- Diluted headline earnings per share of 165.1 cents
- Interim dividend per share of 165.0 cents
Cape Town, 21 May 2019 – Long-term valuation-driven asset manager Coronation Fund Managers today announced its interim results for the six months to end March 2019.
CEO Anton Pillay commented: “The period under review reflects the extremely challenging market conditions experienced worldwide in the three months to end-December 2018, which were somewhat ameliorated by a strong recovery in the first quarter of calendar year 2019.”
Against this backdrop, Coronation’s total assets under management (AUM) remained flat compared to the R587 billion as at end September 2018. However, average AUM for the six months to end-March 2019 decreased by 8%, compared to average AUM for the six months to end-March 2018. “While the decline in average AUM contributed to a 22% decrease in revenue to R1.6 billion, our variable cost model continued to contribute to effective management of total costs. “For the period under review, our operating expenses decreased by 10% as a result of variable costs declining by 18%.” The combined effect was a decrease of 26% in diluted and basic headline earnings per share for the period to 165.1 cents.
Long-term valuation-driven investing
Coronation is an independent active manager, with a long-term valuation-driven investment philosophy. “The 2018 financial year was a challenging period for us, with many of our funds underperforming already anaemic benchmarks. However, in the period under review, we saw a meaningful improvement in short-term performance across most of our strategies.”
Pillay adds that the long-term performance of their entire fund range remains excellent.
Net outflows better than expected
Coronation continues to manage a meaningful share of assets in the local pension fund industry and remain one of the country’s leading managers of long-term retail assets. It also manages a total of R68 billion in its global strategies on behalf of several leading international retirement funds, endowments and family offices.
According to Pillay, Coronation’s local institutional business recorded net outflows equal to 4.3% of its opening balance for local institutional assets, in line with that of the prior comparable period. “We continue to operate in a net-outflow local institutional market, driven by years of low economic growth and poor savings discipline among South Africans. However, we believe the introduction of in-fund preservation could be positive for renewed growth in the pension fund market in the next five to 10 years.”
Pillay also believes they achieved a reasonable outcome in terms of net outflows from their global strategies (equal to 2.4% of its opening AUM in these strategies) given, among other things, the ongoing material shift from active to passive strategies.
Its retail business experienced net outflows equal to 2.9% of its opening retail AUM. “Net inflows at an industry level were subdued, driven by weak economic conditions, impacting consumer sentiment and ultimately savings levels.”
In the period under review, Coronation was rated a Level 2 contributor to broad-based black economic empowerment as per the revised Financial Sector Code.
Commented Pillay: “We are pleased with the tangible progress Coronation has made in transforming the business to reflect our country’s diversity. Of our board of directors, 67% of the non-executive directors are black and 50% are female. Our employees are 56% black, of whom 57% are female.”
Well-positioned for the future
From an operational perspective, following the implementation of a new fund administration model and the insourcing of retail reporting and communications in financial year 2018, Coronation successfully migrated its unit trust client administration to Intembeko Investment Administrators.
Pillay added: “Having concluded these back-office transitions on time, within budget and without interruption to our clients, we believe we are operationally well-positioned to capitalise on our new systems and administration model. This new infrastructure allows us to continue improving on our levels of service to clients, which will ultimately deliver value to all stakeholders.”
From an investment point of view, Pillay said that notwithstanding the uncertainties that abound, Coronation’s objective remains to build diversified portfolios that can absorb unanticipated shocks.
“We will remain focused on valuation and will seek to take advantage of attractive opportunities that the market may present to us and in so doing generate long-term value for all our stakeholders.”
He concluded: “Should current market levels hold, we expect an improvement in our results for the second half of the current financial year.”
General inquiries: Anton Pillay, Coronation
021 680 2000
Analyst inquiries: Johannes van Niekerk, CapitalVoice
082 921 9110
Media inquiries: Louise Pelser, Coronation
021 680 2216/076 282 3995
Despite the FTSE/JSE All Share Index’s 8.0% gain in Q1-19, it produced a mediocre return of 2.7% over the reporting period. Emerging markets were up 9.9% in Q1-19, but only gained 1.7% in the reporting period, as measured by the MSCI Emerging Markets Index in US dollar terms; while developed markets, as measured by the MSCI All Country World Index in US dollars, lost 2.1% for the reporting period, despite adding 12.2% in Q1-19.
Institutional business: AUM and performance update
Our institutional business manages R346 billion (September 2018: R346 billion) on behalf of South African institutions and a growing number of global clients.
South African clients
We manage R278 billion (September 2018: R285 billion) on behalf of local institutional clients.
Within our South African specialist equity strategies:
Coronation Houseview Equity has produced a return of 16.4% p.a. since its inception in October 1993, delivering an active return (alpha) of 2.1% p.a.
Within our market-leading multi-asset strategies:
Coronation Global Houseview has delivered 15.7% p.a. since its launch in October 1993, thereby achieving a real return of 9.7% p.a., while Coronation Managed has produced 15.8% p.a. since its launch in May 1996, representing a real return of 10.0% p.a.
Our South African fixed-income franchise continued to perform very well:
Coronation Strategic Bond has produced a return of 10.0% p.a. since its inception in January 2008, thereby outperforming the All Bond Index by 1.3% p.a., while Coronation Active Bond has produced a return of 11.5% p.a. since its launch in July 2000, representing alpha of 0.9% p.a.
We manage a total of R68 billion (September 2018: R61 billion) in our global strategies on behalf of several leading international retirement funds, endowments and family offices.
Our Global Emerging Markets Equity Strategy saw a strong recovery in short-term performance in Q1-19, taking its annualised active return to 4.0% since its inception more than a decade ago in July 2008.
Our Africa Frontiers Strategy has delivered a strong absolute return of 9.4% p.a. (in US dollars) since its launch more than 10 years ago in October 2008, resulting in an annualised active return of 8.6%.
Launched in December 2014, we are encouraged by the investment track record of our Global Frontiers Strategy, which has delivered an absolute return of 3.8% p.a. (in US dollars) since inception.
All institutional performance returns are stated gross of fees.
We manage R240 billion (September 2018: R241 billion) in retail assets.
Performance highlights across our domestic and international fund range are detailed below, reflecting consistent first-quartile rankings in their corresponding Morningstar categories since their respective inception dates:
- Coronation Top 20, a top-performing general equity fund, has outperformed its benchmark (FTSE/JSE Capped All Share Index) by 3.8% p.a. since its inception in October 2000.
- Coronation Balanced Plus, the no. 1 balanced fund in South Africa since its launch in April 1996, has outperformed its average competitor by 2.0% p.a. and inflation by 8.0% p.a. over this same period.
- Coronation Capital Plus, the no. 1 multi-asset medium equity fund since its inception in July 2001, has delivered a real return of 6.0% p.a. over this same period.
- Coronation Balanced Defensive, a top-performing low equity fund, has produced a real return of 3.5% p.a. since its launch in February 2007.
- Coronation Strategic Income, the no. 1 multi-asset income fund since its launch in July 2001, has outperformed cash by, on average, 2.5% p.a. over this same period.
- Coronation Global Opportunities Equity [ZAR] Feeder, a top-performing global equity general fund since its launch in August 1997, has outperformed the global equity market by 0.8% p.a. over its more than 20-year history.
- Coronation Global Managed [ZAR] Feeder, the no. 1 global multi-asset high equity fund in South Africa since its launch in October 2009, has outperformed its average competitor by 1.7% p.a. over this same period. All performance returns are stated net of fees for the respective retail classes.
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. Coronation Asset Management (Pty) Limited and Coronation Investment Management International (Pty) Limited are investment advisers registered with the United States Securities and Exchange Commission (“SEC”). An investment adviser’s registration with the SEC does not imply a certain level of skill or training. Additional information about Coronation Asset Management (Pty) Limited and Coronation Investment Management International (Pty) Limited is also available on the SEC’s website at www.adviserinfo.sec.gov. The information in this document has not been approved or verified by the SEC or by any state securities authority. 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.