Johannesburg - After beating average market returns and more than doubling its profit from fund management, independent asset manager Coronation Fund Managers has toned down its expectations for future performance.
“The general stock market, the all share index, was up 27 percent. The average increase for five years was 17 percent. I don’t believe those levels are sustainable. So the outperformance we generated this year, we can’t guarantee it,” Coronation chief executive Anton Pillay said.
The Coronation global emerging markets fund outperformed its benchmark index by 9.3 percent a year in the last five years. The Coronation Africa frontiers portfolio outperformed its benchmark annually by 11.5 percent, since its inception in October 2008. In the year to September alone, it outperformed by 17 percent.
Coronation’s flagship family of funds, the Coronation Houseview equity portfolio outperformed its benchmark by 3.6 percent a year over the 20-year period since its inception. In the 12 months to September, the fund manager returned an alpha of 19.5 percent.
An alpha is a measure of performance on a risk-adjusted basis. A fund’s alpha is the excess return it generates compared with returns of the index it is benchmarked on.
Coronation’s global absolute portfolio has generated an alpha of 5.6 percent every year since its launch in August 1999.
But Coronation said the alpha that it generated was lumpy and, at the moment, it was at the height of its cycle. It cautioned investors that it expected lower returns in the future. “We are not saying we will not outperform the benchmarks. We will outperform, but the level of outperformance will be lower,” Pillay said.
He said Coronation’s performance fees were also at a cyclical high and, therefore, when it got to the bottom of the cycle, this could affect its revenues.
“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,” the company said.
Coronation attracted net inflows of R54 billion, including direct flows into international products of R17bn, in the year to September. The company had 45 percent more assets under management than a year earlier at R492bn.
The investment performance and the increased asset base resulted in an 84 percent increase in the group’s revenue to R3.6bn for the year. Profit from fund management rose by 102 percent to R2bn. The company’s headline earnings a share doubled to R4.339 from R2.173 last year, and diluted headline earnings per share jumped 110 percent to R4.16.
Coronation’s retail business attracted R33bn of the flows into the collective investment schemes industry, increasing Coronation’s market share in long-term retail assets to 13.6 percent from 11.2 percent in September last year.
Coronations’ five domestic and international flagship unit trust funds ranked in the first quartile of their categories.
The company declared a final dividend of R2.53 a share, taking the full-year gross dividend to R4.16. The stock fell 0.1 percent to R82.50 yesterday. - Business Report