Caption:  Kim Deane, investment specialist at Coronation Fund Managers, collects the Raging Bull Award from Personal Finance editor Dieketseng Maleke. Picture: Ayanda Ndamane, Independent Newspapers.
Coronation Global Capital Plus Fund won:  • Raging Bull Award: Best (FSCA-Approved) Offshore Global Asset Allocation Fund on a Risk-Adjusted Basis.
The Coronation Global Capital Plus Fund belongs to Coronation’s stable of offshore funds, denominated in US dollars and domiciled in Ireland. Launched in 2011, it invests in a broad range of assets according to its mandate as a moderate-risk global multi-asset fund, aiming to protect against capital loss over any 12-month period. It is suited to investors who require conservative exposure to offshore markets over at least three years and do not require an income from their investment.
Personal Finance spoke to Neil Padoa, Head of Global Developed Markets at Coronation Fund Managers and portfolio manager of the Global Capital Plus Fund.
PF: Can you outline the fund’s objectives and your investment/asset allocation strategy in achieving those objectives?
NP: The fund has a multi-pronged objective aiming to deliver returns that beat cash alternatives and are ahead of inflation, while also providing a measure of capital stability.
We aim to achieve this by owning attractively priced securities across a range of different asset classes. Intelligent asset allocation is the building block of robust returns and the fund will always hold a balance of assets designed to perform differently in different economic backdrops. These asset classes include not only traditional equity and fixed income, but also listed infrastructure, convertible bonds and real estate investment trusts (Reits).
PF: The fund has achieved a solid low-risk return in USD of 4.6% annualised over the last five years. To what do you attribute this long-term outperformance?
NP: The fund’s returns over the last five years have been driven by each of these asset classes, with our positioning in each asset class adding value. For example, approximately one third of the fund (on average) has been invested in equities, which delivered 12% per year over the last five years. This is ahead of the global equity benchmark (the MSCI All Country World Index). Nearly half the fund has been invested in fixed-income instruments, where it has been far more challenging to earn a positive return, as rates started near zero and subsequently increased, meaning benchmark returns were negative. Our conservative positioning and good security selection delivered returns more than 3% ahead of this benchmark. The balance of the fund, a diversified mix of less correlated assets such as gold and listed infrastructure, also contributed solid positive returns.
PF: How did you navigate 2023, which turned out better than expected (your fund returned an excellent 9.3%), considering the high-interest-rate environment?
NP: Interest rates started rising rapidly in 2022, resulting in a very poor year for both fixed income and equity markets. Last year, however, saw a strong recovery despite short-term interest rates continuing to rise. The fund’s 2023 return of 9.3% was again driven by a range of asset classes. Our equity holdings, infrastructure and Reits all delivered over 20% for the year. Our fixed-income holdings returned over 7% (compared to the benchmark return of 5.7%) as we took advantage of the panic in the US regional bank sector and the UBS-Credit Suisse merger, which pushed yields on high-yield bank bonds over 10%. We also extended the duration of the portfolio’s nominal and inflation-linked bonds as rates in both segments of the market peaked – the fund benefited when inflation began to moderate later in the year and rates declined, causing bond prices to rally.
PF: How do you see investment prospects over the next year or so, in both equities and fixed-income?
NP: Looking ahead we would stress that no-one has the ability to predict the direction of markets in the short term. Some volatility is par for the course when investing to generate returns ahead of cash, and investors should expect this. The starting point for fixed-income markets is today far more attractive than five years ago. Yields of around 6% are achievable without taking meaningful risk. This is a healthy starting point and forms the bulk of the fund’s current exposure.
We acknowledge that recent equity market returns have been very strong, and should not be extrapolated. But these returns have been driven by a fairly narrow cohort of some of the biggest stocks, and our team continues to find attractive opportunities outside of the megacaps in areas of the market that remain heavily discounted. We think this is a productive environment for stock pickers with a long-term time horizon, and we remain excited about the portfolio of companies that we are invested in.