Outstanding results from Coronation Fund Managers
12 November 2013 - Coronation Insights
- Assets under management of R492 billion, up 45%
- Diluted headline earnings per share of 416 cents, up 110%
- Total dividend per share of 416 cents
Leading independent asset manager Coronation Fund Managers (Coronation) today reported an outstanding set of results for the year to 30 September 2013, as it celebrates its 20th year in business.
The continuation of excellent investment performance and the substantially increased asset base, as reported in the first half of the year, led to an 84% increase in revenue to R3.6 billion for the financial year. This resulted in an increase in profit from fund management of 102% to R2 billion and diluted headline earnings per share of 110% to 416 cents (September 2012: 197.8 cents). If the effect of Secondary Tax on Companies (STC) in the 2012 financial year is removed, as a result of the introduction of Dividends Tax (DT), the increase in diluted headline earnings per share is 102%.
Anton Pillay, CEO of Coronation Fund Managers commented: “Anchored by our unwavering commitment to investing for the long term, the business produced market-beating returns in a strong yet highly volatile market. Inflows were significant at R54 billion, which includes direct flows into our international products of R17 billion.”
For the year ended 30 September 2013, the total assets under management grew by 45% to R492 billion (September 2012: R339 billion), including an increase in international assets under management to R80 billion.
The Coronation business is built around two primary client market segments. The institutional business offers local and international mandates to South African and international investors, while the retail offering focuses on a range of domestic and international unit trust funds for local investors.
The institutional business enjoyed strong support during the year, attracting total net inflows of R20.7 billion of which R13.2 billion constituted direct flows from South African and global clients into international mandates.
“As a long-term manager, we believe that the only true measure of our investment performance is over meaningful periods of five years and longer,” Mr Pillay said. “We are proud of our domestic and global balanced portfolios having recorded 1st quartile performances over longer-term reporting periods of 5 and 10 years in the respective Alexander Forbes South African and Global Large Manager surveys at the end of September 2013.”
The power of compounding is critical to long-term wealth creation, and Coronation is pleased to report that over its 20-year track record the Coronation Houseview Equity Portfolio has returned an annualised alpha of 3.6% (gross of fees) since inception in October 1993. Likewise, the first-to-market absolute portfolio, Coronation Global Absolute (launched August 1999), has generated alpha of 5.6% p.a. (gross of fees).
The uptake from global capital allocators into the Global Emerging Markets and Africa portfolios reflects the solid performance track records established by these portfolios over the past five years. Since inception in July 2008, the Coronation Global Emerging Markets Fund has outperformed its benchmark by 9.3% p.a. (gross of fees), placing it 2nd in a global peer group of 63 funds as at end September 2013 (Source: Bloomberg data net of fees). Likewise, the Coronation Africa Frontiers Portfolio has generated an exceptional annualised outperformance of 11.5% (gross of fees) of its benchmark since inception in October 2008.
“The retail business attracted a significant portion of the flows into the South African collective investment schemes industry, with total net inflows for the year amounting to R33.3 billion,” said Mr Pillay. Coronation remains the 2nd largest manager of long-term retail assets in the country, with a market share of 13.6% (September 2012: 11.2%).
“All our domestic and international flagship unit trust funds rank in the 1st quartile of their respective Morningstar categories since launch to 30 September 2013,” Mr Pillay said. During the period, Coronation was named Raging Bull Best Domestic Management Company of the Year and Morningstar Best Large Fund House (for the third consecutive year).
A final gross dividend of 253 cents per share has been declared, resulting in a net dividend of 215.05 cents per share for shareholders subject to DT. Together with the interim gross dividend of 163 cents per share, this amounts to a total gross dividend of 416 cents per share for the year.
Mr Pillay concluded, “We continue to caution investors that the absolute levels of returns delivered by capital markets are unsustainable and that we expect lower returns in the future.
Over our 20-year history we have established a robust business. However, as a cyclical business our revenues are highly geared to market returns and the alpha we deliver in the funds we manage. We remain mindful of the fact that the alpha we generate is lumpy and currently at a cyclical high across many of the funds we manage. There will be years where the performance fees earned do not significantly contribute to revenue.
The years ahead will undoubtedly present a more difficult investment environment and we will remain focused on creating long-term value through the cycle for all stakeholders.”
Coronation Fund Managers
Anton Pillay 021 680 2480
Louise Pelser 021 680 2216
076 282 3995
Johannes van Niekerk 082 921 9110
The environment remained very supportive in the period under review, with equity markets around the world delivering high returns (MSCI World Index up 21% and FTSE/JSE All Share Index up 27%). Volatility was high, however, with emerging markets selling off during the third quarter of the financial year on the US Federal Reserve’s announcement of possible quantitative easing tapering. These markets then rallied strongly in September when no change was made, producing 1.3% (as measured by the MSCI Emerging Markets Index) for the financial year. The rand fell 17.2% against the US dollar to close the period under review at R10.03, and 21.2% against the euro to close at R13.55.
On 28 February 2013, Coronation’s broad-based black economic empowerment partner, the Imvula Trust (Imvula), acquired a direct ownership of 10% in Coronation in exchange for Imvula’s shareholding in the unlisted Coronation Investment Management (Pty) Ltd. Imvula, the beneficiaries of which comprise all black staff, was created in April 2005. Coronation is a Level III contributor as measured by the Department of Trade and Industry's Broad-Based Black Economic Empowerment Codes of Good Practice (issued by Empowerdex).
Retail Funds Performance
Highlights as at 30 September 2013 include:
- Coronation Top 20, the no. 1 equity fund since inception in October 2000, which has outperformed its benchmark by a strong 6.5% p.a. (after fees) since launch.
- Coronation Balanced Plus, the no. 1 balanced fund in South Africa since launch in April 1996, which has outperformed its average competitor by 2.8% p.a. (after fees).
- Coronation Capital Plus, which has delivered a return ahead of inflation of 8.6% p.a. (after fees) since inception in July 2001.
- Coronation Balanced Defensive, the no. 1 conservative fund in South Africa since inception in February 2007, which has outperformed inflation by 4.9% (after fees).
- Coronation Strategic Income, which has outperformed cash by on average 3.0% p.a. (after fees) since inception in July 2001.
- Coronation Global Opportunities [ZAR] Feeder Fund (formerly named Coronation World Equity [ZAR]), which has outperformed the global equity market by 1.9% p.a. since launch in August 1997.