the income and growth challenge - coronation fund managers · 2014. 11. 21. · alsi inflation...

The Income and Growth Challengeand Growth Challenge

11 August 2010

Agenda

� The Coronation Value Proposition

� The Income and Growth Challenge

� Market and Asset Allocation Views

� Coronation’s Flagship Income and Growth Solutions

� Coronation Balanced Defensive Fund

� Coronation Capital Plus Fund

Personal Investments Fund RangePersonal Investments Fund Range

Our funds

� Comprehensive range of local and international multi-asset and building block funds

� Focused on a flagship range aimed at meeting the key investment needs

� Available across all major platforms and supermarkets

� Comprehensive information on www.coronation.com� Comprehensive information on www.coronation.com

� Fund selection guidance

� Fund comparison tools

� Publications

Domestic Flagship Funds

19.7%

10.0%14.9%

7.0%

Avg 75%Max 85%

100%

Exposure to Growth Assets

Long-term Growth

Investment Objective

Top 20

(Annualised Return) Balanced

Plus

9.6%

1.5%

12.6%

4.7%New Fund

Risk (Annualised Downside Deviation)

Avg 15%Max 25%

Avg 50%Max 60%

Avg 35%Max 40%

BalancedDefensive

Income & Growth

Income

Return (Annualised Return)

StrategicIncome

CapitalPlus

5 Year Performance & Risk quoted from Morningstar as at 31 July 2010 for a lump sum investment with income distributions reinvested. Growth assets are defined as local and foreign equities, properties.

New fund

International Fund Range (rand-denominated)

Avg 100%

Avg 85%

Long-term Growth(Equity Only)


GEM Flexible[ZAR]

World Equity[ZAR]


(Equity, Property and Commodities)

Risk

Avg 40%

Avg 75%

Avg 65%Global

Managed[ZAR]

Long-term Growth(Multi-asset)

Preservation & Growth(Multi-asset)

Return

Latitude[ZAR]

OptimumGrowth

Growth assets are defined as Equity, Property.

International Fund Range ($-denominated UCITS)

Long-term Growth(Equity Only)


Global Emerging Markets

Global Opps Equity


(Equity, Property and Commodities)

Avg 75%Max 85%

100%

Risk

GlobalManaged

Long-term Growth(Multi-asset)

Preservation & Growth(Multi-asset)

Return

Global Capital Plus

Growth assets are defined as Equity, Property and Commodities.

Avg 15%Max 25%

Avg 50%Max 60%

Avg 35%Max 40%

ALSI Inflation Strat Inc

Capital+ Balanced+ Top 20

R601,84921.9%p.a.

R358,322

R408,07416.7%p.a.


Value of R100,000 invested on 1 July 2001

Value of R100,000, invested in Coronation’s domestic growth-orientated fund since inception of Capital Plus on 1 July 2001, as at 31 July 2010. All income reinvested for funds; ALSI on total return basis.

Sources: Morningstar & I-Net

R358,32215.1%p.a.

R274,34011.8%p.a.

Fund5 year ranking

S.I. ranking

LT Growth

(equity only)

Top 20 1st Quartile 1st Quartile

Coronation Equity 1st Quartile 1st Quartile

LT Growth Balanced Plus 1st Quartile 1st Quartile


(multi asset) Market Plus 1st Quartile 1st Quartile

Income & Growth

Capital Plus 1st Quartile 1st Quartile

Balanced Defensive

New fund 1st Quartile

Income only Strategic Income 1st Quartile 1st Quartile

Source: Morningstar as at 31 July 2010

LOUIS STASSEN, BSc, BCom (Hons), CFALouis is a founder member and former CIO of Coronation. He is a senior portfolio managerwithin the investment team responsible for the Absolute Investments unit which he establishedin 1999. He has more than 20 years' industry experience and has worked in the investmentteams of Allan Gray, Syfrets Managed Assets and Standard Bank in London.

HENK GROENEWALD, B.Eng (E&E), CFAHenk joined Coronation as an equity analyst in January 2005. Prior to this, he spent two years as a trainee equity analyst with Allan Gray and three years as an electrical engineer at Sasol. Henk co-manages the Coronation Resources Fund and the Absolute range of funds.

Meet the Portfolio ManagersCoronation Capital Plus and Coronation Absolute

Henk co-manages the Coronation Resources Fund and the Absolute range of funds.

GREG VAN TIL, BBusSc, Honours (Finance), CFAGreg joined Coronation in 1998 and is head of the Quants team. He is responsible for all derivative positioning used within client portfolios both to enhance returns and provide levels of portfolio protection. Greg is the manager of the Coronation Capital Preserver Fund (institutional investors only) and co-manages the Coronation Optimal Income fund.

Meet the Portfolio ManagersCoronation Balanced Defensive

CHARLES DE KOCK, B.Com (Hons), M.Com (Economics)Charles is a senior portfolio manager with more than 20 years’ investment experience. He plays a leadership role in the asset allocation process and is responsible for the management of a number of balanced retirement funds as well as the core benchmark conscious equity portfolios. These include some our largest retirement fund clients. Charles is also co-manager of the Coronation Balanced Defensive unit trust fund. As a senior member of the team he is involved in all investment discussions, is a regular spokesperson in the media and a popular speaker at client meetings.

MARK LE ROUX, BComAs head of fixed interest investments Mark is responsible for the fixed interest investmentprocess and portfolio management functions for both institutional and retail portfolios. Beforejoining Coronation in August 2005 he was with Decillion where he was integral in thejoining Coronation in August 2005 he was with Decillion where he was integral in thedevelopment of, and responsible for the management of, South Africa’s first fixed interesthedge fund, the Granite Fixed Income Hedge Fund. Mark has 18 years’ experience in managingtraditional fixed interest portfolios (both institutional and unit trust assets) as well as hedgefunds, having worked with OMAM, African Harvest and Decillion.

NEILL YOUNG, BBusSc (Hons Finance), CA (SA), CFANeill joined Coronation in 1998 after completing his articles at Deloitte & Touche, and alsospending time in Luxembourg and New York with the firm. He currently co-manages theCoronation Financial and Balanced Defensive Funds.

Our Value PropositionOur Value PropositionA culture of excellence

BOTTOM

Investors

PROPRIETARY

Research

Investment Philosophy and Process

One Investment Philosophy: Common DNA

VALUATION driv

en

Process

LONG Time HorizonThe bedrock of our Investment Philosophy

BOTTOM-UP

Investors

PROPRIETARY

Research

VALUATION driv

en

Process

Creating long term wealthCoronation Houseview Equity

Coro Equity

Benchmark Alpha

Since inception*

18.3% 14.8% 3.5%

10 years 19.3% 15.1% 4.2%

5 years 19.1% 16.2% 2.9%

3 years 5.2% 1.1% 4.1%

1 year 25.4% 21.3% 4.1%

1,673.918.3% p.a.

1200

1400

1600

1800

2000

� *Sept 1993

� Returns updated to 30 June 2010

1,004.314.8% p.a.

0

200

400

600

800

1000

Sep-93

May-94

Jan-95

Sep-95

May-96

Jan-97

Sep-97

May-98

Jan-99

Sep-99

May-00

Jan-01

Sep-01

May-02

Jan-03

Sep-03

May-04

Jan-05

Sep-05

May-06

Jan-07

Sep-07

May-08

Jan-09

Sep-09

May-10

Coronation Equity

Benchmark

Valuation-driven

Anglo Am erican

50000

60000

70000

80000

HoldR520

HoldR480

BuyR610

BuyR660

BuyR725

BuyR535

Case study demonstrating our through the cycle valu ation process

The market’s buying because the share price is going up

The market’s selling because the share price is going down

0

10000

20000

30000

40000

50000

Jan 08 Apr 08 Jul 08 O ct 08 Jan 09

Coronation Fair Value Spot Share Price Broker Target Price

R480

BuyR400

SellR230

Sell 2B 1

Buy 2

Coronation calls:

We are selling because the share is fully priced

We are buying because the share is undervalued

The Income andGrowth Challenge

or

Retirement planning

A looming crisis for most

i. Expected returns are lower than historic returns

� Equity returns supported by above average earnings growth

� Bonds & property were supported by a significant structural rerating rerating

� But we expect more from offshore

Annualised LT total returnsall numbers up to end June 2010

Very strong real returns from risky assets over last 10 years:

Listed property did particularly well;

Asset class historic real returnsLast decade (to June 2010) versus last 110 years*

10%

15%

20%

Ann

ualis

ed re

al ra

nd re

turn

s

well;

Cash & bonds healthy real returns, but lower more

recently (inflation targeting)

-10%

-5%

0%

5%

All ShareIndex

All BondIndex

Property Cash MSCI

Ann

ualis

ed re

al ra

nd re

turn

s

Past decade Long-term

* Shorter history for MSCI (40 years) and property (30 years)

Source: Deutsche, I-Net Bridge, “Triumph of the Optimists”, Dimson, Marsh, Staunton

10 years 20 years

Total return 16.4% 14.5%

Dividends 3.4% 3.2%

Capital 13.0% 11.3%

Earnings growth 11.9% 8.7%

All share return attribution

Earnings growth 11.9% 8.7%

Rating 1.0% 2.4%

Inflation 6.0% 7.5%

Note: very strong (and unsustainable?) real earnings growth of 5.9% p.a. over last 10 years, compared to US LT trend of 2.3%, and SA GDP growth of 3.6% over same period – this indicates inflated base of around 25%

Listed property return attribution

10 years 20 years

Total return 23.3% 17.6%

Distribution 12.1% 12.5%

Capital 11.2% 5.1%

Distribution growth 5.0% 4.7%

Note: all of the outsize returns earned over last 10 years have been due to rerating – can only happen once… BE VERY CAREFUL

Distribution growth 5.0% 4.7%

Rating 5.9% 0.4%

Inflation 6.0% 7.5%

Local has been “lekker” over thepast decade

Local assets have re-priced. Don’t extrapolate this period into perpetuity

Local assets have re-priced. Don’t extrapolate this period into perpetuity

Compelling buying opportunity for local assets

Compelling buying opportunity for local assets

We expect less from local assets, but more from international

Last 10 years 10 year forecast

Local equity 17.0% 10-12%

Global equity 2.3% 13-15%

Property 23.2% 9-10%

Bonds 13.2% 8-9%

Cash 10.3% 7.5-8.5%

Inflation 6.8% 6%(+?)

I-Net Bridge, Deutsche Bank, CFM Forecast

Retirement planning


i. Expected returns are less than achieved over past 10-20 years

ii. Inflation for a retired LSM 8+ person materially > national CPI

� Healthcare

� Municipal rates/water/electricity� Municipal rates/water/electricity

� Rising tax rates on the “haves”

What is your personal inflation number?

30 June 2010

Retirement planning


i. Expected returns are less than achieved over past 10-20 years

ii. Inflation for a retired LSM 8+ person materially > national CPI

iii. Life expectancies are increasing

Age Male Female

60 81 84

65 82 85

70 84 86

75 85 87

Retirement planning

iv. Exposure to growth assets structurally too low

� Only growth assets increase real value of capital

� Deep human aversion to losses (ST returns)

� Results in blind-spot for LT impact of inflation

v. Leaving investors desperately vulnerable late in retirement

� When a client retires age 60

� The first 10 years are comfortable

� But it’s the next 15 that count…

Income rate & return analysisIncome security very sensitive to return andinflation assumptions…

Nominal net investment return p.a.

2.5% 5.0% 7.5% 10.0% 12.5% 15.0%

Selected in

come rate p.a.

2.5% 21 30 50+ 50+ 50+ 50+

5.0% 11 14 19 33 50+ 50+

Years before your income will start to reduce if inflation is 6%

Source: Asisa Standard on Living Annuities, with additional calculations by Coronation

Selected in

come rate p.a.

5.0% 11 14 19 33 50+ 50+

7.5% 6 8 10 13 22 50+

10.0% 4 5 6 7 9 20

12.5% 2 3 3 4 5 7

15.0% 1 1 2 2 2 3

17.5% 1 1 1 1 1 1

Income rate & return analysis… presenting potential problems for many existing retirees

Nominal net investment return p.a.

2.5% 5.0% 7.5% 10.0%10.0% 12.5%12.5% 15.0%15.0%

Selected in

come rate p.a.

2.5% 21 30 50+ 50+ 50+ 50+

5.0% 11 14 19 33 50+ 50+

Years before your income will start to reduce if inflation is 6%

Many retirees are drawing 7.5%-10%

Source: Asisa Standard on Living Annuities, with additional calculations by Coronation

Selected in

come rate p.a.

5.0% 11 14 19 33 50+ 50+

7.5%7.5% 6 8 10 1313 2222 50+50+

10.0%10.0% 4 5 6 77 99 2020

12.5% 2 3 3 4 5 7

15.0% 1 1 2 2 2 3

17.5% 1 1 1 1 1 1

drawing 7.5%-10% & expecting

returns of 12.5%-15%. Note how sensitive their

income security is to a 2.5% decline in expected return!

Actual experience 2001 – 2010Superior outcome for Capital Plus investors

Income rate in 2001 3% 5% 7% 9%

Capital invested in 2001 1,000,000 1,000,000 1,000,000 1,000,000

Annual income in 2001 30,000 50,000 70,000 90,000

Annual income in 2010 (effect of actual CPI) 52,381 87,301 122,221 157,142

Capital in 2010 if invested in MMF 1,445,000 1,134,100 889,161 696,729

Capital in 2010 if invested in Capital Plus 2,263,122 1,775,337 1,391,906 1,090,671Capital in 2010 if invested in Capital Plus 2,263,122 1,775,337 1,391,906 1,090,671

Income rate in 2010

Coronation Capital Plus 2% 5% 9% 11%

Average money market fund 4% 8% 14% MAX

Source: Coronation Research

Note: Analysis includes 115bps allowance for platform & advice costs. MAX = 17.5%

The big decisions summarised

� Objective: Making capital last while sustaining your standard of living

� The key trade-offs:

� Decide on a level of income high enough to fund an acceptable living standard but low enough to make this living standard sustainable

� Construct a portfolio that can limit the variability of returns from year to year still able to protect you against the eroding effects of inflation

� The most important conclusions:

� Starting income levels above 6%-7% of capital is problematic

� Adequate exposure to growth assets is imperative, especially in the early years of retirement

� Alpha and fees are more important in low return environments

Market ViewsMarket Views

YTD returnsup to 30 June 2010

Source: FT

The global recovery:recovery:

Fears of double dip

Economic recovery … some issues

� Global economic recovery losing a little steam

� Slowing job gains, weaker housing sales in USA for example

� Especially in Europe where fiscal tightening will hamper growth

� Mostly the smaller countries, but austerity in UK as well

� China also slowing after a very strong run

� Property prices a concern

� Global interest rates to remain low, may even see more QE

� The deflation scare has resurfaced

� Some loss of momentum in SA too as indicated by weak PMI number

Growth momentum slowing at high level.But fears of double dip exaggerated

Global PMI suggest global GDP growth of about 4.5 – 5% in the second half of 2010

Source: Thomson Reuters, Credit Suisse research

Chinese growth levelling off


Corporate balance sheets strong

Cash on the balance sheet is at 50-year high in the US


Sovereign debt problems:Greece rescued for now but still in ICU

� The great recession has left most industrial developed countries in worst ever peace time fiscal shape

� Greece would have defaulted but for the EU/IMF rescue

� Rescue deals with liquidity not underlying solvency

� Debt restructuring still to come?� Debt restructuring still to come?

� Excellent case study for politicians around the world

� Contagion to Portugal, Spain and more averted for now

� Austerity plans announced for Ireland, Spain, Portugal

� Governments now more aware that prudent fiscal management is req’d

Sovereign debt problems:Our insights

� Interest rates likely to stay low for long time

� To compensate for fiscal austerity and near term deflation risks

� Risk in too low for too long lets inflation genie out of bottle

� Globe undergoing painful adjustment but will grow, albeit below-trend

� Austerity measures not draconian in world’s major economies (USA, UK, Germany, Japan)

� The big Emerging Markets have no leverage problem

� The fiscal crisis will force much needed structural reforms in Europe (Retirement reform, Size of government)

SA economySA economy

South Africa: macro environment

� Growth: we stick to our view of at least 3% this year

� Inflation: back in target helped by strong rand and low food prices, but

high wage settlements & continued pressure on administered prices

concerning for longer term outlook

� Rand: risk appetite remains key driver

� Interest rates: sluggish recovery may trigger one more cut, but we

think policy is loose enough. Next big move remains up, but not soon

SA recovery in housing

Sign of slowdown in SA too

BondsBonds

Inflation contribution

6

8

10

12

14

Food Transport

Other Total

Source: Stats SA

-2

0

2

4

6

Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10

Inflation outlook

8.0

9.0

10.0

11.0

12.0

13.0

14.0CPITarget band. Forecast period

Source: Stats SA, CFM forecast

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11

Net government bond market funding

Rbn

60

80

100

120

140

160

Actual

Budgeted

Source: National Treasury

-20

0

20

40

60

1989

/90

1991

/92

1993

/94

1995

/96

1997

/98

1999

/00

2001

/02

2003

/04

2005

/06

2007

/08

2009

/10

2011

/12

Expect to be revised lower as revenues beat forecasts

Coronation’s Flagship Income and Growth Solutions

Coronation Balanced Defensive FundCoronation Capital Plus Fund

Coronation Balanced Defensive Fund

Charles de Kock


10.6%

10.5%7.6%

7.4%


Long-term Growth


Top 20


PlusAvg 75%Max 85%

100%

8.9%

1.3%

7.7%

4.9%

7.4%

9.4%


BalancedDefensive

Income & Growth

Income


StrategicIncome

CapitalPlus

Performance & Risk quoted from Morningstar as at 31 July 2010 for a lump sum investment with income distributions reinvested at the inception date of Balanced Defensive, 1 February 2007.

2.6%

Avg 15%Max 25%

Avg 50%Max 60%

Avg 35%Max 40%

120

125

130

135

140

Growth of a R100,000 investment on 1 February 2007

Coro Balanced Defensive

Mean Prudential Low Equity

Coronation Balanced DefensiveThe strategy has delivered

R135.7669.4%p.a.

R124.0436.5%p.a.

100

105

110

115

120

Feb-07

Mar-07

Apr-07

May-07

Jun-07

Jul-07

Aug-07

Sep-07

Oct-07

Nov-07

Dec-07

Jan-08

Feb-08

Mar-08

Apr-08

May-08

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Performance quoted from Morningstar as at 31 July 2010 for a lump sum investment with income distributions reinvested

10.00%

15.00%

20.00%

Rolling 12 Month Returns & Standard Deviation

Coronation Balanced Defensive Capital protection is key

Outperformed its peers and protected capital over all 12

month periods

-5.00%

0.00%

5.00%

Feb-08

Mar-08

Apr-08

May-08

Jun-08

Jul-08

Aug-08

Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Coro Balanced Defensive Mean Prud Low Eq Coro Ann Std Dev Mean Ann Std Dev


PERFORMANCE FOR VARIOUS PERIODS FUND PRU LOW EQUITYMEAN

OUTPERFORMANCE

Since Inception (unannualised) 35.8 24.0 11.8

Since Inception (annualised) 9.4 6.5 2.9

3 Years (annualised) 9.6 6.2 3.4

1 Year (annualised) 11.8 9.6 2.2

Year to date 6.2 4.3 1.9

Coronation Balanced Defensive Consistent Top Quartile Returns


2009 13.5 11.1 2.4

2008 6.6 0.5 6.1


Balanced Defensive Prudential Low Equity Mean

Annualised Return 9.4% 6.5%

Annualised standard deviation 4.5% 4.8%

Annualised downside deviation 0.7% 0.9%

Sharpe ratio 0.0 -0.6

Coronation Balanced Defensive Consistent Top Quartile Returns, at lower risk

Sortino ratio -1.1 -3.4

Maximum Drawdown -2.6% -3.6%


40

50

60

70

80

90

100

Int Cash/FI

SA Pref Shares

SA IL Bonds

SA Corp Bonds

SA Gov Bonds

Balanced Defensive FundYear Asset Allocation History

Max exposure to growth assets

0

10

20

30

40

Mar 07

Jun 07

Sep 07

Dec 07

Mar 08

Jun 08

Sep 08

Dec 08

Mar 09

Jun 09

Sep 09

Dec 09

Mar 10

June 10

SA Cash

SA Real Estate

Int Equities

SA Equity

Growth assets: SA Equity, Int Equity & SA Property

Coronation Balanced Defensive Portfolio Positioning – 30 June 2010

7.3

18.2

Int Equity

SA Equity

15.6

19.7

23.0

SA IL Bonds

SA Corp Bonds

SA Cash

3.3

7.3

SA Real Estate

Int Equity

Reg. 28 Compliant

3.4

4.7

4.9

SA Pref Shares

SA Gov Bonds

Int Cash/FI


7.3

18.2

Int Equity

SA Equity

SA EQUITY TOP 10 HOLDING DIVIDEND

MTN 1.7% 4.8%

STD BANK 1.5% 4.4%

CORONATION 1.1% 9.0%

BAT 1.1% 5.6%

NASPERS 1.0% 1.3%

ANGLO AMERICAN 1.0% 1.8%

BHP BILLITON 0.9% 3.2%

SASOL 0.8% 4.6%

RICHEMONT 0.7% 1.1%

BIDVEST 0.6% 3.9%

MR PRICE 0.6% 3.8%

3.3

7.3

SA Real Estate

Int EquityOFFSHORE EQUITY HOLDING

CORO GEM FUND 2.6%

CORO GLOBAL OPP EQUITY FUND 3.8%

SA REAL ESTATE TOP 5 HOLDING YIELD

CAPITAL SHOPPING CENTRES 0.9% 4.6%

GROWTHPOINT 0.6% 8.4%

FORTRESS 0.6% 10.3%

SA CORPORATE 0.5% 10.6%

RESILIENT 0.2% 8.2%

ACUCAP 0.1% 8.7%

FOUNTAINHEAD 0.1% 8.7%


15.6

19.7

23.0

SA IL Bonds

SA Corp Bonds

SA Cash

SA PREFERENCE SHARES TOP 5 HOLDING YIELD

ABSA 1.5% 7.5%

INVESTEC 0.7% 8.0%

FIRSTRAND 0.2% 7.3%

PSG 0.2% 8.5%

NETWORK HEALTHCARE 0.2% 8.5%

SA INFL BOND TOP 5 HOLDING YIELD

ABSA (ABCPI3) 2.9% 4.3

FIRST RAND BANK (FRBI23) 2.4% 4.0

STANDARD BANK (SBSI11) 2.3% 3.9

NEDBANK (NBKI1) 2.0% 3.7

GOVERNMENT (R202) 1.1% 3.0

3.4

4.7

4.9

SA Pref Shares

SA Gov Bonds

Int Cash/FI

GOVERNMENT (R202) 1.1% 3.0

SA CORP BONDS TOP 5 HOLDING YIELD

FIRST RAND BANK (FRX15) 2.4% 9.4

ANGLO AMERICAN (AA03) 1.6% 9.6

STANDARD BANK (SBS9) 1.5% 9.5

NEDBANK (NBK2A) 1.4% 9.5

ABSA (ABS5) 1.2% 9.5

SA GOV BONDS TOP 5 HOLDING YIELD

R 203 4.0% 8.7

DV07 0.3% 7.3

R 186 0.3% 9.0

CCT02 0.2% 11.0

Coronation Capital Plus Fund

Louis Stassen


19.7%

10.0%14.9%

7.0%


Long-term Growth


Top 20


Plus Avg 75%Max 85%

100%

9.3%

2.5%

12.6%

4.7%New Fund


BalancedDefensive

Income & Growth

Income


StrategicIncome

CapitalPlus

5 Year Performance & Risk quoted from Morningstar as at 31 July 2010 for a lump sum investment with income distributions reinvested. Growth assets are defined as local and foreign equities, properties and commodities.

New fund

Avg 15%Max 25%

Avg 50%Max 60%

Avg 35%Max 40%

Historic scorecard

� Overall fund performance satisfactory

� Stock selection good, defensive nature showed in market decline

� Property allocation reduced too early, still consider longer term outlook risky

� Nominal bond position conservative, preferred to take exposure through inflation linkersthrough inflation linkers

� Inflation linked bonds performed well, with credit spreads also coming in

� Offshore exposure continues to hurt fund performance, although conservative positioning in offshore assets cushioned the blow somewhat

� Committed to target of no negative 12month period

Coronation Capital Plus FundAsset Allocation History

Max exposure to growth assets

Growth assets: SA Equity, Int Equity & SA Property

Max exposure to growth assets reduced to 60%

Coronation Capital PlusThe strategy has delivered

R358.32015.1 %p.a.

R212.860

R305.04013.3%p.a.

250

300

350

400 Value of R100 invested on 02 July 2001

Coronation Capital Plus

Mean of Domestic AA Pru Variable Equity

CPIX +4%


50

100

150

200

Jun-01

Sep-01

Dec-01

Mar-02

Jun-02

Sep-02

Dec-02

Mar-03

Jun-03

Sep-03

Dec-03

Mar-04

Jun-04

Sep-04

Dec-04

Mar-05

Jun-05

Sep-05

Dec-05

Mar-06

Jun-06

Sep-06

Dec-06

Mar-07

Jun-07

Sep-07

Dec-07

Mar-08

Jun-08

Sep-08

Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

PERFORMANCE FOR VARIOUS PERIODS FUND PRU VARIABLE EQUITY MEAN

OUTPERFORMANCE

Since Inception (unannualised) 259.0 213.9 45.1

Since Inception (annualised) 15.1 13.4 1.7







2009 15.5 14.7 0.8

2008 0.7 (7.8) 8.5

2007 9.5 12.0 -2.5

2006 22.4 22.8 -0.5


Capital Plus Fund Balanced Medium Equity Mean

ALSI

Annualised Return 14.8% 13.9% 15.9%

Annualised std dev 7.9% 10.1% 19.3%

Annualised downside deviation 4.2% 5.6% 11.8%

Sharpe 0.7 0.5 0.3


Sortino 1.3 0.8 0.6

Correlation 0.9 0.8

Max Drawdown -8.3% -20.1% -40.4%


Income Assets

Growth Assets

53.8

Coronation Capital Plus Portfolio Positioning – 30 June 2010

15.9

34.6

Int Equity

SA Equity5.7

15.0

15.2

SA Cash

SA Corp Bonds

SA IL Bonds

Assets

46 53.8(Max 60)

Reg. 28 Compliant

3.3

15.9

SA Real Estate

Int Equity

1.0

4.1

5.0

SA Gov Bonds

Int Cash/FI

SA Pref Shares

Coronation Capital Plus Portfolio Positioning – 30 June 2010

15.9

34.6

Int Equity

SA Equity

SA EQUITY TOP 10 HOLDING DIVMTN 3.4% 4.8%REMGRO 2.7% 2.5%TIGER BRANDS 2.1% 4.4%NASPERS 2.0% 1.3%ANGLO AMERICAN 1.9% 1.8%SPAR 1.9% 4.9%STANDARD BANK 1.7% 4.4%VODACOM 1.6% 5.6%BAT 1.2% 5.6%NEDBANK 0.9% 4.8%

3.3

15.9

SA Real Estate

Int EquityOFFSHORE EQUITY HOLDINGCORONATION GLOBAL OPP EQUITY 7.2%CORONATION GLOBAL CAPITAL PLUS 4.7%CORONATION GLOBAL MANAGED 2.5%PAN AFRICAN RESOURCES 0.3%

SA REAL ESTATE HOLDING YIELDHOSPITALITY PROPERTY FUND 0.7% 9.5%CAPITAL SHOPPING CENTRE GROUP 0.7% 4.6%ACUCAP PROPERTIES LIMITED 0.6% 8.7%FORTRESS INCOME FUND 0.5% 10.3%FOUNTAINHEAD PROPERTY TRUST 0.4% 8.7%

Coronation Capital Plus Fund Portfolio Positioning – 30 June 2010

5.7

15.0

15.2

SA Cash

SA Corp Bonds

SA IL Bonds

SA IL BONDS TOP 5 HOLDING YIELDSTANDARD BANK(SBSI10) 3.1% 3.9%STANDARD BANK (SBSI11) 2.3% 3.9%FIRST RAND BANK (FRBI23) 2.0% 4.0%ABSA (ABCPI3) 1.6% 4.3%R 210 1.6% 3.1%

SA CORP BONDS TOP 5 HOLDING YIELDNEDBANK (NBK2A) 1.7% 9.5%STANDARD BANK (SBS9) 1.5% 9.5%ABSA (ABS5) 0.9% 9.5%MTN (MTN01) 0.9% 7.1%AFRICAN BANK (ABL10A) 0.5% 11.2%

1.0

4.1

5.0

SA Gov Bonds

Int Cash/FI

SA Pref Shares SA PREFERENCE SHARES TOP 5 HOLDING YIELDABSA 2.3% 7.5%INVESTEC 1.5% 8.0%PSG 0.3% 8.5%NEDBANK 0.3% 7.5%FIRSTRAND 0.1% 7.3%

SA GOV BONDS TOP 5 HOLDING YIELDR 203 0.4% 8.7%R 204 0.4% 8.8%R 207 0.4% 8.9%R 157 0.3% 8.0%

Coronation Absolute FundSuperior Returns

362.7818.3 %p.a.

202.38

279.1514.3%p.a.

200

250

300

350

400 Cumulative Return Since Inception

Coro Absolute Fund

Mean of Pru Var Eqt

CPIX + 6%


202.38

50

100

150

200

No

v-02

Mar

-03

Jul-0

3

No

v-03

Mar

-04

Jul-0

4

No

v-04

Mar

-05

Jul-0

5

No

v-05

Mar

-06

Jul-0

6

No

v-06

Mar

-07

Jul-0

7

No

v-07

Mar

-08

Jul-0

8

No

v-08

Mar

-09

Jul-0

9

No

v-09

Mar

-10

Jul-1

0

Coro Absolute Fund

Pru VariableEquity Mean

ALSI

Annualised return 18.3% 14.3% 18.6%

Annualised standard deviation 10.8% 9.3% 18.7%

Downside deviation 6.9% 5.1% 10.8%

Sharpe 0.9 0.6 0.5

Coronation Absolute FundSuperior Returns at lower than market risk

Sharpe 0.9 0.6 0.5

Sortino 1.3 1.0 0.9

Correlation 0.9 0.8

Max drawdown -23.3% -16.0% -40.4%


Growth

Coronation Absolute Fund Portfolio Positioning – 30 June 2010

19.4

53.9

Int Equity

SA Equity4.6

5.9

8.6

SA Corp Bonds

SA Cash

SA IL Bonds

Income Assets 22

Growth Assets

78(Max100%)

Reg. 28 Compliant

2.1

2.6

19.4

Int Real Estate

SA Real Estate

Int Equity

0.8

0.9

1.2

SA Pref Shares/Other

Int Cash/FI

SA Gov Bonds

Conclusion

� The income & growth challenge will get more taxing, not less

� Keep drawdown rates low and growth asset exposure high

� Adding alpha and minimising costs remain important

� Our income & growth solutions have delivered beyond expectations

� Capital Plus delivered 8.5% real p.a. since 2001 and offers a unique risk budgetunique risk budget

� Balanced Defensive established a top-of-class track record in the low equity category

� We remain committed to provide our clients with solutions to this challenge

QUESTIONS?

Disclaimer

Coronation Asset Management (Pty.) Ltd. is an Authorised Financial Service Provider.

The content of this presentation and any information provided may be of a general nature and

may not be based on any analysis of the investment objectives, financial situation or particular

needs of the client. (as defined in the Financial Advisory Intermediary Services Act) As a result,

there may be limitations as to the appropriateness of any information given. It is therefore

recommended that the client first obtain the appropriate legal, tax, investment or other

professional advice and formulate an appropriate investment strategy that would suit the risk

profile of the client prior to acting upon such information and to consider whether any

recommendation is appropriate considering the client’s own objectives and particular needs.

Any opinions, statements and any information made, whether written, oral or implied are

expressed in good faith.

THANK YOU

the income and growth challenge - coronation fund managers · 2014. 11. 21. · alsi inflation...

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