Coronation to intensify focus on retail market offerings
CORONATION Fund Managers plans to intensify its focus on the retail market following a period in which market volatility and client outflows slowed growth in assets under management.
The asset manager grew assets under management by 3.7% to R610bn during the year to the end of September, compared with last year’s growth of 20%.
CEO Anton Pillay said growth had slowed due to heightened market volatility.
The MSCI emerging markets index shed 19%, while the JSE all share index declined 14.5% in dollar terms during Coronation’s financial year.
“In the near term, we are going to experience continued volatility,” said Mr Pillay.
“This will (affect) potential returns. Returns will be (affected) by China, by commodity pricing, and by the timing of the (US Federal Reserve) rate — it has been priced in, but they haven’t indicated ‘this will be the rate at the end of the year’.”
The company also suffered net client outflows of R15.3bn, with the bulk of these from domestic institutional customers.
Three years ago, Coronation took a strategic decision to close certain products within its domestic institutional business to new customers, but existing institutional customers such as pension funds can still have their money managed within the business.
The decision was made to protect Coronation’s ability to continue outperforming on its investment mandates from existing clients.
The company now manages R370bn in institutional assets.
“This active decision in a shrinking formal occupational retirement fund market means that stakeholders should expect continued outflows in the years ahead,” said Mr Pillay.
The market volatility and outflows saw Coronation’s revenue and profit fall 7% and 10% to R4.4bn and R2.4bn respectively, but it still managed a final gross dividend of 270c per share, taking its dividend for the year to 516c.
The company is looking to expand its retail offering as customers use more retail products. “We see our growth coming from our retail strategies and global products range,” said Mr Pillay.
During the financial year, the company launched two global funds aimed at retail investors to add to its international offering.
The fund has also launched a tax-free investment product in which customers can invest up to R30,000 each year. It has 12 underlying unit trusts.
Mr Pillay said it was too early to measure take-up of the products.
“We will assess (this) in the same period next year. It is too early to make any meaningful conclusions,” he said.
Coronation slashed its fees and reviewed its benchmarks subsequent to the financial year.
To ensure that its product range was simple and consistent, performance fees on multi-asset products were removed; and performance fees on equity products were retained.
A fee discount would apply if the portfolio underperformed its benchmark over five years.
Mr Pillay does not think the reduction in income from the fee review would upset shareholders.
“We believe that acting in the best interests of our clients and continuing to focus on generating long-term performance, contributes to a sustainable business that will ultimately create longterm value for all stakeholders,” the CEO said.
The share fell 0.32% to close at R70.95 yesterday.