CHOOSING THE RIGHT FUND

Investment specialist Christo Lineveldt and head of Personal Investments Pieter Koekemoer helps you to identify the multi-asset fund most suited to your international investment needs.

 

The quick take:

  • Coronation was founded on managing multi-asset portfolios for South African investors and we’ve been doing that on behalf of millions of investors for more than 26 years.
  • If you then invest in an appropriately-managed multi-asset fund, that is suited to your time horizon, the probability of a decent outcome becomes very high.
  • Multi-asset funds Coronation Optimum Growth, Coronation Global Managed and Coronation Global Capital Plus are the most popular funds in our offshore fund range.
Q: Why have we simplified the choices down to Coronation Optimum Growth, Coronation Global Managed and Coronation Global Capital Plus?

These three funds represent the most popular funds in our offshore fund range, and they have all the key feature of being multi-asset funds. The big benefit of a multi-asset portfolio is that you, the investor, gives us, as your fund manager, the mandate to invest across a wide variety of investment opportunities on your behalf. Because we have this much wider universe to select from, it means that these funds are robust, and that an investment in them can be sustained over very long periods of time because we can adapt the portfolio as circumstances change.

Q: The key differentiator between the three funds is investment horizon. Why?

One of the ground rules of investing is that the more risk, the higher the expected return. With a higher expected return, you also have more variability of outcome in any given year.

Global Capital Plus is a conservative portfolio where the amount of assets invested in growth assets (shares or property) is constrained. This means that the returns from year to year are less variable, and the expected return over a very long period of time is lower. In US dollar terms, we expect 4 – 5% per annum.

Global Managed is a classic multi-asset portfolio. Often you would refer to a 60/40 fund, or a fund that splits 60% between shares and 40% between income assets. Such a portfolio takes a significant amount of risk and therefore is more appropriate for the medium to longer term. And because of that balance, the fund is more viable for investors with a five-, six-, seven-year investment horizon.

Optimum Growth will have more growth asset exposure. Typically, we would expect 75- 85% of the fund to be invested in shares. As a result, it is preferable to allow your investment more time to get the benefit of the investment.

Q: If a reasonable return expectation is 4-5% in US dollars for Global Capital Plus, what could investors expect in terms of returns from Global Managed and Optimum Growth?

If we start with Global Capital Plus, the return expectation in US dollars is based on an expected inflation rate in the US of about 2% plus a real return of 2-3%, which gives you the 4-5% US dollar return. If you look at the funds with more exposure to risk assets (Global Managed and Optimum Growth), you would expect a US dollar return of 6-8% per annum over time in the case of Global Managed, and 7-10% per annum in the case of Optimum Growth. The latter is due to the fund’s higher growth asset exposure and also because there is a wider universe of shares that you can select from.

Fund

Recommended investment term

Expected return

Global Capital Plus

3 years +

4-5% p.a. in US dollars

Global Managed

5 years +

6-8% p.a. in US dollars

Optimum Growth

10 years +

7-10% p.a. in US dollars


Q: So it is important for investors to understand the time horizon required from them before they invest?

Correct. If you then invest in an appropriately-managed multi-asset fund, that is suited to your time horizon, the probability of a decent outcome becomes very high.

Q: Why should investors consider investing offshore with Coronation in one of the above funds?

Our business was founded on managing multi-asset portfolios for South African investors and we’ve been doing that on behalf of millions of investors for more than 26 years. We now have an investment team of nearly 70 professionals that cover all the major asset markets around the world. From markets in the big developed economies of the US, Europe and the UK, through to the large emerging markets such as China and India to frontier markets such as Indonesia, Turkey, Vietnam, the rest of Africa, across listed property, bonds and other yielding assets. By doing proprietary research, covering all those different opportunities across the globe, it gives us the opportunity to blend the best ideas out of our research process into robust portfolios that include many different drivers of future returns