INVESTING
31 October 2020
How might alternatives play a bigger role in investors’ portfolios?
research capabilities, implemented by an integrated global investment team of 70 professionals, with an average of more than 14 years in the industry and just over 10 years with Coronation. As a bottom-up, active investor, we do proprietary research on the available investment opportunities across the world. We then blend the most promising investment opportunities we have identified into resilient portfolios that are tailored to deliver risk-adjusted returns that meet our investors’ needs – no matter how challenging the global environment may be.
Drawing on the breadth and depth of an integrated global investment team Since launching our first global fund, Coronation has built up substantial international investment expertise and
Comprehensive fund information is available in the minimum disclosure document available on coronation.com.
EQUITY MARKETS ARE HIGH US$ billions
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Optimised for risk first The investment philosophy of the Fund is the same as our medium-risk global balanced fund but is optimised for risk first. As such, it is invested in growth assets such as equities, real assets (such as infrastructure and property) and equity-like fixed interest income instruments. The balance of the portfolio is invested in assets that offer inflation protection, absolute returns and capital preservation. The Fund is managed to preserve the dollar value of the Fund over rolling 12to 24-month periods. Bear in mind this target is not guaranteed, but investors in
the Fund do get access to Coronation’s 21-year track record of managing global multi-asset class funds. As such, the Fund is comfortably positioned in the top quartile of similar global funds that are available to South African investors over five and ten years, as well as since inception. For the period since launch, the A-class of the fund has delivered a return of 3.9% per annum in US dollars, compared to the per annum return of 0.5% from US dollar cash.
Jun 79
Enter the conservative multi-asset fund In a lower-for-longer interest rate environment, cash effectively yields 0% in the developed world. Thus, if you want to achieve consistent real returns in hard currency but cannot tolerate risk, a better alternative to consider is a well-diversified conservative multiasset fund that is managed with an absolute mindset. Investors who want to incorporate more conservative offshore exposure in their portfolios, while still
achieving reasonable real returns of between 2% to 3% in USD over time, will find this in the Coronation Global Capital Plus Fund. The Fund is actively managed, has a low-risk exposure and is invested across asset classes. While it contains some of our best investment ideas for global growth, it has been moderated for investors with less tolerance for risk. Global Capital Plus is globally unique, given that it is a balanced fund that has dual objectives: delivering a respectable real return while keeping a careful eye on risk. It gives investors access to asset classes that will outperform cash and inflation over time, with a mandate that allows for more than half of the portfolio to be invested in growth assets.
Nov 80
I
nvesting offshore right now may seem like a risky endeavour when stocks are trading at record highs and income investments at record lows. Add a global pandemic to the background, which is presenting a unique inflationary risk, and it’s understandable why investors may be preferring the safety of cash. However, traditionally considered low-risk assets, fixed interest instruments are now exhibiting more downside risk than ever before. For example, approximately 25% of global bonds have negative yields, while a further 65% yield less than 1%, representing a returnless risk. At the same time, the five-month rally in US equities out of a bear market slump has raised concerns that stock markets may have moved too far, too fast to justify their elevated valuations.
An attractive alternative to investing in cash offshore
Jan 78
CHRISTO LINEVELDT Personal Investments Specialist, Coronation Fund Managers
This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or financial product or to adopt any investment strategy. The opinions expressed are as of June 2020 and may change as
Aug 76
Growth across the alternatives spectrum We may see significant growth in illiquid private markets – these are markets where assets are not traded on an index. Such securities can take longer to buy and sell, hence being defined as illiquid – as well as more-liquid alternative strategies that
subsequent conditions vary. Important information This material is for distribution to Professional Clients (as defined by the Financial Conduct Authority or MiFID Rules) only and should not be relied upon by any other persons. Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Please refer to the Financial Conduct Authority website for a list of authorised activities conducted by BlackRock. Please be advised that BlackRock Investment Management (UK) Limited is an authorised Financial Services provider with the South African Financial Services Board, FSP No. 43288. Any research in this material has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy. This material is for information purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer. © 2020 BlackRock, Inc. All Rights reserved.
Changing regulations One of the key mechanisms driving this growth is the European Long-Term Investment Fund (ELTIF), which makes it easier for a wide range of investors to invest in infrastructure, private businesses and education facilities, among other initiatives. Insiders feel that ELTIFs could have a similar impact on private markets to the impact the Undertakings for the Collective Investment in Transferable Securities’ (UCITS) had on the hedge fund industry (an investment fund that uses alternative strategies to make a return), which helped more investors gain access to alternative strategies a decade ago.
Oct 73
Technology Many experts expect technology to drive more investors towards alternatives. Technology has a role to play in developing more sophisticated products, increasing transparency and educating investors on the role alternatives can play in their portfolios.
invest in listed equities and bonds. Private markets, such as infrastructure and privately listed bonds, are increasingly seen as sources of income, capital growth and diversification for every kind of investor, from wealth managers to retail customers.
Mar 75
D
ue in part to a steady decline in the number of listed stocks, industry insiders predict that finding returns in traditional markets will become increasingly difficult. As a result, many investors are turning to alternatives to add diversification and greater return potential to their traditional 60/40 (equity/bonds) portfolios. But what else could drive this growth in the years ahead?
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Source: Federal Reserve Bank of St Louis, Bloomberg. Corporate profits after tax exclude Inventory Valuation Adjustment (IVA) and Capital Consumption Adjustment (CCAdj)
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