Jokes aside, after that hell ride we’re due for a market spike
Coronation Fund Managers had a ghastly year, but says depressed investor sentiment signals a good time to buy
Coronation Fund Managers, which turned 25 years old in 2018, has just signed off on one of the toughest of those years. At the end of December its assets under management had dropped to a several-year low of R550bn and its share price of around R40 was also at levels not seen for years.
It can’t have helped that media headlines throughout most of 2018 were dominated by Steinhoff, in which Coronation had a hefty exposure. Inevitably investors were prompted to recall the fund managers’ exposure to the previous high-profile corporate wipe out, African Bank.
In its latest Corospondent newsletter Kirshni Totaram, global head of institutional business, described 2018 as “humbling”, which is a term not often used in connection with Coronation. And is a concept that has certainly not influenced the company’s remuneration committee’s thinking, so far.
The fund manager’s chief investment officer, Karl Leinberger, described it as a “bruising year” with many of their funds underperforming already anaemic market benchmarks. The current period has been exceptionally tough because not just one asset class or region has been hit; the assault has come from a wide variety of fronts.
But Leinberger was upbeat, as investment managers are inevitably required to be, pointing out that throughout much of its history Coronation’s portfolios have underperformed the market in one out of three years.
It was this underperformance (from buying undervalued assets that were falling and selling overvalued assets that were rising) suggested Leinberger, that guaranteed the subsequent outperformance.
The good news, for us all, is that having been very negative about the local equity market for most of the past five years, Coronation is now much more optimistic about future returns. It has used the depressed sentiment to bump up its equity holdings. Leinberger sees value both in rand hedges and in domestic stocks.