Coronation’s Win is a Record-breaker

[First published in Personal Finance, January 2014]

Coronation Fund Managers claimed the title of South African Management Company of the Year for a record-breaking sixth time at this year’s prestigious Raging Bull Awards ceremony held in Sandton on Wednesday night.

The event is hosted by Personal Finance in association with Profile-Data and PlexCrown Fund Ratings.

Coronation has been the leading company for three years in a row and also claimed the title in 2003, 2005 and 2006. Coronation has been among the top three management companies 11 times during the 19-year history of the awards.

PSG was the runner-up, ahead of Nedgroup Investments.

Allan Gray fell back to being ranked fifth among the managers of South African funds.

For the past three years, Coronation, Allan Gray and Nedgroup have dominated the top three positions in the management company rankings as determined by PlexCrown Fund Ratings. Allan Gray has been in the top three since 2009, including four years as the winner of Raging Bull Award for the management company of the year.

Local asset manager Oasis claimed the Raging Bull Award for the Offshore Management company of the year for the management of its foreign-currency denominated funds domiciled in Ireland.

The management company awards are based on consistent, good performance on a risk-adjusted basis across all of the managers’ qualifying funds, as measured by PlexCrown Fund Ratings.

Only offshore funds that are registered with the Financial Services Board as suitable for South African investors qualify for a PlexCrown rating.

Coronation’s strength showed through in the number of certificates it collected – nine in total – while Nedgroup Investments and PSG each collected one certificate.

However, the awards went to a variety of managers, including private-client wealth managers and boutique asset managers, some of which were first-time winners at the Raging Bull Awards.

Among the managers of private- client portfolios that also run unit trust funds was Harvard House, which claimed the coveted Raging Bull Award for the Best South African Equity Fund over three years to the end of December 2014.

Harvard House claimed for its Flexible Income Fund the Raging Bull Award for the Best South African Interest-bearing Fund over three years and the certificate for the Best South African Multi-asset Income Fund over three years.

The Sasfin MET Equity Fund, managed by stockbroker David Shapiro, claimed the Raging Bull Award for the Best South African General Equity Fund on a risk-adjusted basis over five years.

Another private-client wealth manager, ClucasGray, received the Raging Bull Award for the Best South African Multi-asset Flexible Fund on a risk-adjusted basis over five years for its Future Titans Prescient Fund.

Jersey-based Contrarius, the boutique fund management company started by former Allan Gray chief investment officer Stephen Mildenhall, collected the Raging Bull Award for the Best Offshore Global Equity Fund over three years for the second time in a row.

27four, an up-and-coming multi-manager that invests in the funds of other managers, won the Raging Bull Award for the Best South African Multi-asset Equity Fund on a risk-adjusted basis. The manager also received two certificates for the management of its South African multi-asset funds.

The Raging Bull Award for the Best Rand-denominated Global Equity Fund over three years to the end of December went to the Old Mutual Global Equity Fund, which is managed by Old Mutual Global Investors in London.

The award for the Best Offshore Global Asset Allocation Fund went to the Lloyds Multi Strategy Fund Limited (Growth Strategy), a multi-managed fund overseen by Lloyds Investment Fund Managers.

Some 40 certificates were awarded at the ceremony, with established managers such as Stanlib, Absa and Old Mutual collecting four certificates each. Other certificate recipients were: Investec, Community Growth, Sanlam Investment Management, Catalyst, Imalivest and three private-client managers, Autus, Stringfellow and S Bro, and boutique manager Rootstock. Offshore companies that received certificates were Templeton, Franklin and Sarasin & Partners.

HIGH EXPOSURE TO OIL-RELATED SHARES SEES ALLAN GRAY FALL FROM FAVOUR

Long-time favourite Allan Gray dropped out of the three top performers in the PlexCrown survey of management companies and, for the first time since 2009, was neither the winner of nor the runner-up for the company of the year award at this year’s Raging Bull Awards.

Allan Gray came fifth, after Prudential, in the PlexCrown Fund Ratings survey of unit trust companies to the end of last year, with an average score of 3.614 PlexCrowns for its seven funds that qualify for PlexCrown ratings.

Allan Gray’s offshore and multi-asset funds were affected by the performance of the funds of its offshore partner, Orbis.

In Allan Gray’s latest quarterly commentary, Orbis says its key mistake in 2014 was allocating too much of its portfolios to the shares of companies that are highly sensitive to the price of oil. It says these included companies in the energy sector and shares listed in countries where oil prices exerted a significant influence on the economy, such as Russia.

Oil-sensitive shares contributed roughly two-thirds of Orbis’s under-performance in 2014, it says.

Orbis had thought it highly unlikely that the oil price would collapse by nearly 50 percent.

Rob Dower, Allan Gray’s chief operating officer, says that although its Equity Fund out-performed the market last year – in part, because of an underweight allocation to resource shares – its Equity, Balanced and Stable funds were all affected by the fall in Sasol shares, because it is one of the largest holdings in these funds.

Sasol has been affected by investors reacting with a mixture of fear and panic to the weakness in commodity prices, and the market is increasingly sensitive to short-term developments, Dower says.

Most of the products that Sasol sells are priced off the prevailing oil price. Allan Gray thinks Sasol offers excellent value relative to local shares that are priced at full value, and Allan Gray has been adding to its positions in this share.

Three of Allan Gray’s seven funds that qualify for a PlexCrown rating achieved the above-average rating of four PlexCrowns each: the Equity Fund, the Balanced Fund and the Bond Fund.

The Stable Fund and the Orbis Global Equity Feeder Fund achieved an average three PlexCrowns each.

But Allan Gray scored a low one PlexCrown for its global multi-asset fund, the Allan Gray-Orbis Global Fund of Funds, and only two PlexCrowns for its Optimal Fund.

Richard Carter, the head of product development at Allan Gray, says the Stable Fund and the Balanced Fund both had the maximum exposure of 25 percent to offshore markets through various Orbis funds. The impact of the under-performance of the Orbis funds appeared to be more pronounced in the Stable Fund than in the Balanced Fund, because the Stable Fund is more conservatively positioned, with less off-setting return from other sources.

The Optimal Fund invests only in equities but uses exchange-traded derivative contracts or futures on stock market indices to reduce its net equity exposure to between zero and 20 percent of the fund.

The fund’s return depends on short-term interest rates and the shares that the fund has selected relative to the index on which it has futures.

Carter says the fund had a good 2014, returning 12.5 percent, but its performance over five years was 6.03 percent.

Orbis’s funds have not performed as well as Orbis or Allan Gray would have liked over the past five years, but the company believes the funds are well positioned for the future, and Allan Gray will continue to adhere to its philosophy, which has delivered over the long term, Carter says.

WISE WORDS FROM CORONATION

Moderate your return expectations, leading asset manager Coronation Fund Managers cautions.

Portfolio managers Karl Leinberger and Duane Cable say that, over the past decade, almost all asset classes have generated significant returns.

They say the investment waters look choppy, with many uncertainties and unknowns.

Many financial experts have predicted what may happen in 2015, but Leinberger and Cable say that history has taught us that our ability to forecast the immediate future is limited.

“If you waste much of your time worrying about questions that can’t be answered, you lose focus on the few things that can be answered,” Leinberger and Cable say. They quote painter Vincent van Gogh, who once remarked: “Fishermen know that the sea is dangerous and the storm terrible, but they have never found these dangers sufficient reason to remain onshore.”

Leinberger and Cable say that, when looking after your money, they try to ignore the “noise” about financial markets and focus only on share valuations – the price of a share relative to its expected future earnings.

RAGING BULL AWARDS AND CERTIFICATES – THE ESSENTIALS

Ten Raging Bull Awards are made each year. The most coveted award, for the South African Management Company of the Year, is made on the basis of an average PlexCrown Fund Rating that measures risk-adjusted returns and consistency of performance across all of a unit trust manager’s qualifying funds for periods up to five years. Certificates go to the runners-up in second and third place in the domestic management company rankings.

There is a Raging Bull Award for the Offshore Management Company of the Year. The award is made on the basis of a manager’s average PlexCrown Fund Rating for the management of foreign-currency funds domiciled outside of South Africa but which the Financial Services Board (FSB) has approved as suitable for South African investors.

Four fund awards are made on the basis of outright (straight) performance over three y ears in the South African equity general sector, the South African interest-bearing sector (the interest-bearing short-term and variable-term sub-categories and the multi-asset income sub-category), the (rand-denominated) global equity general sector and the offshore global equity sector (foreign-domiciled funds approved by the FSB).

Four awards are made on the basis of risk-adjusted returns as measured by the PlexCrown ratings over periods up to five years. These are for the best funds in the South African equity general sub-category, the South African multi-asset flexible sub-category, the broader South African multi-asset category (low, medium or high equity sub-categories) and the offshore global asset allocation sector.

Apart from the 10 Raging Bull Awards and the certificates for the company of the year runners-up, certificates are awarded to individual funds in the various fund sub-categories for both straight performance over three years and risk-adjusted performance over five years.

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