One of the main reasons that the fund is able to outperform a riskier investment such as the Alsi is that it is better able to protect investors against downside risk. This is clear during the financial crisis where the fund falls by a lot less than the market, and as a result is able to recover losses faster. The mathematics of recovery from a loss is often not well understood by investors. If an investment loses 20% it has to do 25% to get back to zero. A 50% loss requires a 100% return to recover initial capital. That is the main reason risky investments struggle to provide returns over time because while they can deliver spectacular returns over the short term, they are often undone by big losses.
The fund is managed by Coronation CIO Karl Leinberger and Duane Cable and is over R61bn in size. Another attraction of the fund is that it has a fixed fee structure with no performance fees due for benchmark beating returns. The TER of 1.61% must be largely due to the higher fee structure in its two largest holdings, Coronation Global Opportunity Equity fund and the Coronation Global Emerging Markets fund.
The fund complies with pension fund guidelines and can have a maximum of 25% invested offshore, 25% in listed property and 75% in equities. It currently has a high cash weighting of 22% and is fully invested offshore. These calls may be what will protect the fund should local markets fall as well as bringing the value of downside protection to investors.