Coronation Fund Managers grew its assets under management (AUM) by 11% to R634 billion in the year to September 2021, from R569bn. However, it once again reported a net cash outflow of average AUM.
The net (excluding capital and currency changes and charges) outflow was 4.8% in the 2021 financial year. This follows net outflows of 7% of average AUM in 2020, 7.7% in 2019 and 5.2% in 2018.
Of the R634bn in AUM, R444bn (2020: R380bn) was South African assets and R190bn (R189bn) was international.
Coronation said its net client cash flows from longer-term funds were broadly in line with those of the retail investment industry.
“We expect inflows into the savings industry to remain subdued given the growth constraints faced by the South African economy and a general lack of domestic investor confidence, which is likely to continue to depress investor demand for long-term investment funds.
“In addition, current exchange control limits applicable to collective investment scheme managers may force us into a position where we will not be able to meet the full demand for our rand-denominated international fund range in future.”
Markets continued to perform strongly in 2021 after coming off the low base of March 2020, Coronation said. For the 12-month reporting period, the MSCI All Country World Index was up 11% (in US dollars), the MSCI Global Emerging Markets Index was up 18% (US$), and the FTSE/JSE All Share Index was up 23% (in rands).
“Strong outperformance of the underlying markets in client mandates contributed to excellent results for the 12 months ended 30 September 2021, with revenue and earnings from fund management up 17% and 23%, respectively, from the prior year.”
Gross revenue from fees rose from R3.64bn to R4.26bn.
However, as Coronation pointed out when it released its interim results, it benefited from a cyclical high in performance fees that “will normalise in the years to come”.
Total operating expenses increased by 8% compared to last year, with the highest growth attributed to the increased regulatory burden and investment in information systems and technology.
Fixed expenses were up 5% compared to the prior year.
Coronation said its retail funds delivered a “strong performance” over the reporting period.
According to the asset manager:
- 89% of the assets entrusted to its rand-denominated funds are invested in funds that produced first-quartile performance in their respective peer groups over the past 10 years, while 99% of the assets are invested in funds with above-average performance over the same period.
- 18 out of 23 of its unit trusts rank first in their respective Asisa categories since their inception dates.
Retail AUM grew to R267bn from R239bn.
Coronation said it generated “exceptional returns” across its institutional client portfolios “over all meaningful periods”.
Of the institutional assets that have been invested with Coronation for more than 10 years, 96.4% have outperformed their benchmarks since inception on an asset-weighted basis.
Of its institutional portfolios, 97.4% with 15-year track records and 97.9% with 20-year track records have delivered outperformance over those periods.
It said the net outflows in its South African institutional business were smaller this year than in previous years but continue to be heavily impacted by the net outflows of the broader, formal savings industry.
“We expect this to continue to be the case in the years ahead given the current economic climate and our meaningful share of the savings industry.”
Local and international institutional AUM grew to R367bn from R330bn, while South African retirement industry AUM grew to R293bn from R251bn.
However, global institutional AUM fell from R79bn to R74bn.
Coronation said the “small” net outflow reflected some profit-taking by clients after the strong returns of 2020.
Prospects for the year ahead
Coronation said the economic outlook for the 2022 financial year was mixed.
“The global economy continues to recover strongly, supported by pent-up demand, a tight labour market and strong consumer balance sheets.”
The key risks for investors are stretched valuations, inflation, and a new and more dangerous coronavirus variant.
It expected the South African economy to remain under pressure, with formal employment growth lagging the recovery in economic activity, and the “corrosive nature” of structural headwinds, such as load-shedding and failing municipalities.
“Notwithstanding this weak economic environment, we continue to find excellent value in the domestic and emerging equity markets and domestic fixed income markets.”