Financial Mail - Investors Monthly - - Analysis: High Equity Funds -

This forms part of Coro­na­tion’s core or flag­ship range. It has a 19-year history and is man­aged by Karl Lein­berger, who is also chief in­vest­ment of­fi­cer, and Duane Ca­ble. It has out­per­formed its com­pos­ite bench­mark by 2%/year since in­cep­tion.

The fund would cer­tainly qual­ify as a house view fund which dis­plays the Coro­na­tion DNA. To keep things sim­ple the fund takes its in­ter­na­tional hold­ings through sis­ter funds, with a 19% ex­po­sure to the Coro­na­tion Global Op­por­tu­ni­ties Eq­uity Fund and 5% to its award-win­ning Global Emerg­ing Mar­kets Fund plus a fur­ther 2% in the African Fron­tiers Fund. It has an ex­po­sure of more than 5% to the UK prop­erty mar­ket through two JSE-listed busi­nesses, Intu (for­merly Cap­i­tal Shop­ping Cen­tres) and Cap­i­tal & Coun­ties, which owns Covent Gar­den and Earls Court in Lon­don. The do­mes­tic shares in­clude house favourites such as Naspers, Bri­tish Amer­i­can To­bacco, Stein­hoff, An­glo Amer­i­can and MTN.

Lein­berger says the top-down po­si­tion is com­pli­cated as there is a clear di­chotomy within the global econ­omy, with the US in re­cov­ery mode and ex­pected to start hik­ing in­ter­est rates in Septem­ber. At the same time Europe is fight­ing de­fla­tion while China slows down and is now cut­ting in­ter­est rates. Lein­berger says that re­source shares, af­ter re­cent declines, present an op­por­tu­nity to val­u­a­tion-based in­vestors. But with­out con­vic­tion around the re­cov­ery of the Chi­nese econ­omy he is treat­ing the sec­tor with cau­tion. The fund prefers An­glo Amer­i­can, Mondi, Sa­sol and Exxaro. It has been hit in the short term by its hold­ings in plat­inum shares, though at least these are the low-cost pro­duc­ers, Northam and Im­pala Plat­inum.

Ca­ble is not op­ti­mistic about the lo­cal econ­omy, with slow de­mand for com­modi­ties and the ef­fects of load-shed­ding. Yet the fund holds food re­tail­ers such as Spar, Shoprite and Pick n Pay as well as broad re­tail­ers such as Wool­worths, Fos­chini and Clicks.

Lein­berger says banks are rea­son­ably priced but the best value in the fi­nan­cial sec­tor can be found in in­sur­ers such as MMI and Old Mu­tual.

He says there is no value in global bonds but do­mes­tic bonds are start­ing to look more at­trac­tive. In­fla­tion-linked bonds re­main cen­tral to the port­fo­lio and cor­po­rate bonds are an in­creas­ing fea­ture; spreads have widened since the demise of African Bank. He says the fund holds the higher qual­ity prop­erty names, which should out­per­form cash and bonds in the long term.

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