Coronation delivers credible results in a challenging market environment
10 November 2015 - Coronation Insights
- Assets under management of R610 billion, up 3.7%
- Diluted headline earnings per share of 516.0 cents, down 9.7%
- Total dividend per share of 516 cents
Leading independent long-term manager Coronation Fund Managers (Coronation) today announced annual results for the 12 months to 30 September 2015.
Market volatility intensified throughout the financial year, reflecting the deterioration in the outlook for global growth and the withdrawal of funds from emerging market equities and currencies. The MSCI All Country World Index returned -6.2%, while the MSCI Emerging Markets Index declined by 19.0% (in US dollar terms) for the financial year.
The FTSE/JSE All Share delivered a US dollar return of -14.5%, which translated into a positive return of 4.8% in rand terms for the financial year. Albeit not the worst among the emerging market currency grouping, the rand fell 18.4% against the US dollar (to close at R13.82) and 7.9% against the euro (to close at R15.46) over the reporting period.
Due to a decline in both market returns and the abnormally high level of performance fees generated in the prior financial year, revenue for the current period declined by 7.0% to R4.4 billion. This, in turn, led to a 9.7% decline in diluted headline earnings per share to 516.0 cents compared with the record high earnings base achieved in the prior financial year (2014: 571.6 cents).
“Despite a challenging market environment, we delivered a credible set of results in line with our expectations. Coronation is a cyclical business and hence our annual revenue stream is highly geared to both the returns of the market and the level of outperformance we generate on behalf of clients across our fund range. We have a proven philosophy of long-term investing, which has added significant value to investors over our 22-year history,” Anton Pillay, CEO of Coronation commented.
The long-term success of Coronation’s investment approach is best illustrated by the annualised alpha of 2.9% delivered by its flagship domestic equity fund, Houseview Equity, since inception in 1993.
Assets under management increased by 3.7% to R610 billion for the 12 months to end September (2014: R588 billion) against a backdrop of meaningful declines in global markets and total net outflows of R15.3 billion.
Pillay continued: “We attracted strong inflows to our international products and retail business, and in line with our expectations, recorded net outflows in our established South African institutional business. These outflows are a result of our decision to close our SA Equity and Multi-Asset portfolios to new institutional investors three years ago. This active decision in a shrinking formal occupational retirement fund market means that stakeholders should expect continued institutional outflows in the years ahead. Coronation has a sizeable share of the South African institutional savings market, and given the above, overall market share will decline to a normal level in coming years”.
The South African institutional business recorded net outflows of R34.2 billion in line with management’s expectations and continue to be offset by strong flows into the niche global product offering. Global products attracted net inflows of R12.4 billion, bringing total net outflows for the institutional business to R21.8 billion.
Coronation continues to identify product opportunities suited to its long-term investment approach and seeded the Coronation Active Global Equity and Coronation Global Frontiers funds early in the year under review.
The retail business maintained its position as one of South Africa’s foremost managers of long-term assets in the collective investment schemes industry, with a market share of 14.6% (2014: 15.1%).Net inflows for the year were R6.5 billion. “This normalisation of flows follows a number of exceptional years in which Coronation attracted disproportionately high levels of industry assets,” Pillay said.
Coronation was named Raging Bull South African Management Company of the Year for the third consecutive year, and Morningstar Best Large Fund House for the fifth consecutive year. At 30 September 2015, the majority of its domestic and international flagship funds ranked in the 1st quartile of their respective Morningstar categories since their respective launch dates and after the deduction of all fees.
During the year under review, three new retail products were added to the range: Coronation Global Equity Select [USD], Coronation Global Equity Select [ZAR] Feeder, and the Coronation Tax-Free Investment offering. Pillay added: “As a client-centric business, we continuously assess our fund range to ensure that we are meeting the needs of our clients. As a result, we implemented a comprehensive fee and benchmark adjustment across a variety of funds, which will result in a simplification and or reduction in fees for a number of funds from 1 October 2015.”
Pillay continued: “Coronation remains committed to achieving meaningful, sustainable and substantive transformation within the financial services industry in South Africa”.
Coronation is measured as a Level 3 contributor in terms of the Financial Sector Code at 30 September 2015:
- More than half of its staff composition in South Africa are black. At executive committee level black representation is 75%, while at board level this figure is 57%.
- Coronation is 21.5% black owned as measured by the Financial Sector Charter, which includes its staff-owned empowerment vehicle, the Imvula Trust.
- The Coronation Business Support Programme, now in its tenth year, continues to play a meaningful role in advancing the black stockbroking community. To date, a total of 9 South African stockbroking companies have directly benefited from this initiative.
A final gross dividend of 270.0 cents per share has been declared for the year ended 30 September 2015, resulting in a final net dividend of 229.5 cents per share for shareholders subject to Dividends Tax (DT). Together with the interim gross dividend of 246.0 cents per share, this amounts to a total gross dividend of 516.0 cents per share for the year.
Pillay concludes: “Coronation is an active manager solely focused on delivering strong market outperformance over the long term. We have a proven long-term investment track record of alpha generation that has endured many periods of short-term underperformance over the past 22 years. Despite recent levels of extreme market volatility, our long-term investment track records of all key funds remain highly compelling. While the likelihood of continued near-term volatility persists, as disciplined and rational allocators of capital, we are committed to identifying those opportunities that will generate long-term performance across all our client portfolios. Our success in achieving this objective will generate long-term value for all stakeholders”.
Coronation Fund Managers
Louise Pelser 021 680 2216
076 282 3995
Johannes van Niekerk 082 921 9110
Key highlights from the institutional fund range include:
- The global balanced portfolios ranked in the 1st quartile over 5 and 10 years in the Alexander Forbes Global Large Manager Watch™ survey to end September 2015, and the domestic baland portfolios were in the 1st quartile over 5 years and 2nd quartile over 10 years in the SA Large Manager Watch™ survey.
- Global Absolute, the first-to-market absolute portfolio, has produced alpha of 4.6% p.a. (gross of fees) since inception in August 1999.
- The specialist bond portfolio, Strategic Bond, has outperformed the local bond market by 1.6% p.a. (gross of fees) since inception in January 2008.
- The Coronation Global Emerging Markets Fund has generated an annualised alpha of 4.1% (gross of fees) since inception in July 2008.
- The specialist African equity portfolio, Africa Frontiers, has outperformed its benchmark by 6.0% p.a. (gross of fees) since inception in October 2008.
Key highlights from the retail fund range include:
- Coronation Top 20, a top-performing general equity fund since launch in October 2000, has outperformed its benchmark by 4.5% per annum (net of fees) over the same period
- Coronation Balanced Plus, the no. 1 balanced fund in South Africa since launch in April 1996, has outperformed its average competitor by 1.9% p.a. (net of fees) over the same period.
- Coronation Capital Plus, the no.1 multi-asset medium equity fund since launch in July 2001, has outperformed inflation by 7.6% p.a. (net of fees) over the same period.
- Coronation Balanced Defensive, a top-performing conservative fund since launch in February 2007, has outperformed inflation by 4.4% p.a. (net of fees) over the same period.
- Coronation Strategic Income, the no.1 multi-asset income fund since launch in July 2001, has outperformed cash by, on average, 2.8% p.a. since launch (net of fees) over the same period.
- Coronation Global Opportunities Equity [ZAR] Feeder, the no.1 global equity general fund since launch in August 1997, has outperformed the global equity market by 1.4% p.a. (net of fees) over the same period.
- Coronation Global Managed [ZAR] Feeder, the no. 1 global multi-asset high equity fund in South Africa since launch in October 2009, has outperformed its average competitor by 1.6% p.a. (net of fees) over the same period.
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 and Coronation Investment Management International (Pty) Limited are authorised Financial Services Providers regulated by the Financial Services Board of South Africa. Coronation Asset Management (Pty) Limited and Coronation Investment Management International (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 Services Board 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.