Coronation Fund Managers’ fund management earnings increased by a whopping 273% to 617.1 cents a share in the year to September 30 after being boosted by solid returns from global markets and the unwind of a provision following the successful conclusion of a tax matter.
Total dividends increased 243% to 566 cents per share, from 165 cents per share.
Excluding the impact of the now-concluded SA Revenue Services (SARS) matter, which went in favour of Coronation in June 2024, fund management earnings a share were up 9% at 402.9 cents.
Assets under management (AUM) increased 11% to R667 billion after strong market returns and continued out-performance. Average AUM increased 2% to R631bn.
The R794 million tax issue with SARS was about the tax treatment of profits earned by Coronation's Dublin-based subsidiary, Coronation Global Fund Managers.
“Global markets delivered solid returns in 2024, as financial markets absorbed many concerning geopolitical tensions, while also responding positively to encouraging developments in inflation, economic growth and interest rate outlooks,” Coronation’s directors said.
In South Africa, asset returns had been robust, fuelled by growing optimism that the new Government of National Unity will deliver reforms and unlock growth.
“Coronation’s portfolios performed well amid the market volatility, with clients benefiting from the value generated by our active asset allocation and rigorous research approach. For the period, 92% of our funds have outperformed their benchmarks since inception,” they said.
Long-term out-performance in the South African portfolios continued to be outstanding at 97%, “with many ranking exceptionally high in industry surveys.”
Coronation said a globally integrated approach to managing offshore allocations in Regulation 28-compliant funds had been material in unlocking value for clients.
“Our global portfolios have recently delivered promising performance, and we are encouraged by the renewed interest in our Africa Frontiers Strategy after a decade of muted investor enthusiasm for this asset class.”
Operating expenses, excluding the SARS tax matter, increased 8%, reflecting the rising cost of doing business in South Africa.
“We remain acutely aware of the competitive, skills-constrained environment in which we operate and have continued to invest meaningfully to maintain our market-leading position,” the directors said.
Key areas of investment included strengthening local and global investment capabilities, enhancing client service systems, optimising information, technology and data management, and upholding compliance standards.
The company also efficiently managed the heightened level of withdrawals that accompanied the Two-Pot retirement system roll-out on September 1, 2024. Net outflows moderated to 8.1% of average AUM during the period.
“The South African savings industry remains cash-flow negative, and, as a major industry player, Coronation is likely to continue experiencing outflows reflective of the broader environment.”
As a result of the reversal of a provision on the tax matter, a special dividend of 153 cents per share was declared in September 2024.
Mike Gresty, a fund manager at Anchor Capital, said: “For years Coronation has not been able to grow their assets and they have suffered some big outflows in South Africa. But we think it could potentially be a good play on a better local investment market. Even so, what worries me is that I want to see what outflows they have had as a result of the Two-Pot System. Structurally it’s not that expensive. It pays a really good dividend and finally you might see asset performance running ahead of outflows."
Company milestones:
Another milestone for the company was the announcement of a second Broad-Based Black Economic Empowerment deal, to be presented to shareholders for approval at a general meeting on November 28. If successful, the transaction will elevate Coronation’s black ownership to 51%, building on its 2005 Imvula Trust black employee ownership initiative.
“This advancement will not only enable us to participate in mandates requiring majority black ownership across both private and public sectors, but will also reinforce our long-standing commitment to substantive transformation,” the company’s directors said.
Several new products were also launched. An ex-China Global Emerging Markets Strategy for institutional clients was launched, as were two fixed-income unit trusts, while seven actively managed exchange-traded funds were listed on the JSE.
Notwithstanding the latest plan to improve its black ownership, the company already has a Level 1 B-BBEE status.
Assets managed by experienced black portfolio managers worth R278bn represent 42% of AUM.
Of the South African-based employees, 63% are black and 50% are women. The woman-led board of directors is 80% black, while 50% are women.
In addition to the chairperson, three board subcommittees and subsidiaries were chaired by women.
Key leadership positions held by black leaders include CEO, CFO, COO and the Heads of Institutional Business, Fixed Interest, Core Equity and Absolute Return.
BUSINESS REPORT