Coronation Fund Managers, SA’s second-largest money manager, has forecast a bleak outlook amid a struggling economy, with the pool of savers shrinking.
The firm’s forecast comes after it bled assets in the first half of its fiscal year.
“There is certainly going to be less money coming into the savings environment for the foreseeable future as people have to balance savings with their day-to-day spending,” CEO Anton Pillay told Business Day.
Pillay was speaking shortly after the company reported a 3.8%, or roughly R22bn, rise in net outflows in the six months to March, reflecting a wider scramble for cash from retail clients losing their jobs or salaries, and corporate customers seeking to build their cash buffers to ride out challenges posed by the Covid-19 pandemic.
“With the dynamics in SA and some of the structural concerns across the sector, we can probably expect to have outflows on that level for the next two years,” he said.
Larger rival Ninety One, which was spun out of banking group Investec and separately listed in Johannesburg and London in March, has reported a 12% drop in net inflows in its financial second half.
Coronation, which also competes with Sygnia Asset Management on the JSE, said assets under management fell 11% to R508bn, reflecting 2020’s selling frenzy in financial markets following a coronavirus lockdown that triggered worries of a prolonged global economic downturn.
“I think the next six to 12 months will paint a clearer picture of the impact of the virus and the initiatives that have been put in place to help alleviate the economic burden on people,” Pillay said. “We probably expect to return to about 95% of pre-coronavirus GDP levels in 2022/2023, about a two- to three-year impact.”
The government has put in place measures to soften the economic blow of the lockdown on employees taking deep pay cuts or those on unpaid leave. Analysts predict the economy will suffer a double-digit contraction in 2020 and tip millions of middle-class households into poverty. It is yet to produce a recovery plan.
Shares in Coronation, which bucked the growing trend in corporate SA of companies axing, delaying or slashing dividend payouts, rose 1% to R37.73. This outpaced a 0.5% drop in the stock of its closest competitor, Ninety One. The company boosted its shareholder rewards by 8% to 178c a share.
Nolwandle Mthombeni, investment analyst at Mergence Investment Managers, said the change in Coronation’s investment performance stood out from its report card.
“The key highlight is that the investment performance has improved — that was one of the biggest problems Coronation had; they were underperforming their benchmarks. It’s the first start to getting investor confidence and it’s evidenced by the actual fee they’re earning — it’s a bit higher, showing that there might be some performance fees in the base,” she said.
The company reported an 8% increase in net profit to R624m, citing cost cuts and relatively strong short-term performance in its equity portfolios, from which it earns performance fees.
Update: May 27 2020
This article has been updated to clarify that a drop in client cash flows, which can be confused with cash flow statements, refers to net inflows.
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