Asset manager Coronation Fund Managers is looking at growing its international franchise, which constitutes about 31% of its total assets under management, as the domestic savings industry dwindles in the face of low economic growth.
The asset manager’s offshore franchise had R194bn in assets under management in the six months to end-March, up from R160bn reported in 2023, with the group looking to grow it further.
The company’s overall assets under management grew 5.1% to R631bn at the halfway stage despite SA equity market returns being “relatively anaemic”.
CEO Anton Pillay said more South Africans than before were externalising their wealth through feeder funds.
“Our international strategy is important for our growth. We have improved performance on that product range on the shorter and medium term and will affect our long-term performance. We now have a full product range and have launched new products,” Pillay said.
Operating internationally “is still a difficult environment. You have tough competition in the global markets. We are definitely focusing on growing that international franchise. With the changes to regulation 28, we adopted an integrated approach to portfolio management.”
Coronation’s Global Houseview Strategy (a regulation 28-compliant balanced fund) had at end-March delivered an annual return of 15% since inception.
Local investors have joined the exodus after the National Treasury’s decision to allow local pension funds to invest up to 45% offshore. In 2022, an amendment to regulation 28 of the Pension Funds Act allowed pension funds to increase offshore allocations from 30% of assets to 45%. This has led to substantial outflows of investment from SA and lowered JSE liquidity.
Pillay said the company expected the SA savings industry to contract further.
“Our industry is heavily reliant on the growing economy. To the extent that we have had just more than 1% GDP growth over the past 10 years with not a significant increase projected for this year, we are clearly falling behind the curve,” Pillay said.
This translated to lower household savings and less employment at a corporate level. “Our household savings sit at 1.7% of GDP, which is very low.
“If you look at the impact the lack of growth has had on people, you will see that most people have on average a debt-income of about 60%-70%. That does not bode well for the savings industry.”
The group’s revenue increased 4.3% to R1.89bn in the six months, while headline earnings per share increased to 200.5c from 6.2c a year ago, the company said in a statement on Tuesday.
Fund management earnings per share increased to 185.8c from a loss of 13c a year ago. Fund management earnings are used by management to measure operating financial performance, which excludes the net mark-to-market effect of fair value gains and losses and related foreign exchange on investment securities held.
An interim dividend of 185c per share was declared.
The group said global equity markets delivered strong returns in the period, while SA equity market returns remained relatively anaemic. Net outflows were in line with the group’s expectations at 4% of average assets under management, largely due to the weak SA savings industry, to which Coronation is significantly exposed.
“We also expect a near-term uptick in industrywide outflows once the new two-pot retirement system comes into play. However, we believe that this reform is positive for SA savers and the local savings industry over the long term,” it said.
The group expected the difficult operating environment to extend into the foreseeable future.
Pillay said he was proud of the strides the company had made in contributing towards transformation of the industry, particularly by increasing the talent pool of women.
“We have maintained our level 1 contributor status to BBBEE since 2021 and we are 31% black owned, with R263bn (42% of total assets under management) managed by black investment professionals. Of our SA-based employees, 64% are black and 50% women,” Pillay said.
“This year, all the graduates in our internship programme are black and 60% are women. Over time, we have placed 52 of our interns in permanent positions at Coronation.”
Data from the Asset Management Research Institute shows employment trends in the industry continue to heavily favour men, especially in investment-related roles. The data shows that the number of women who went into investment roles is less than half that of men and that women’s ability to progress to investment leadership roles depends on the talent pipeline.
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