Manager Research

We have recently completed our review of Coronation’s Global and local fund range and have downgraded the Global Emerging Markets fund to Tier 2 and the Coronation Equity Fund to Tier 2. A Tier 2 rating means that the funds remain positively rated and are still investable but there are a few areas that we would like to monitor going forward. We have retained the ratings on the other Coronation global and local funds that we cover. A full list of these ratings and our justification for them can be found below.

Coronation is an independent, investment-led asset manager that we continue to rate highly. Across the business, we find compelling evidence of investment merit developed over multiple decades, backed by a consistent investment approach.

The Global Emerging Markets fund was launched in 2008 and has been headed up by Gavin Joubert since its inception. Gavin is supported by a team of eight analysts. In 2023, Gavin moved to London and today the team is split between London and South Africa. At this juncture, it is worth noting that Gavin is key to this strategy and we do not believe the fund has an obvious successor should he step back from portfolio management, which we do not think is likely at this stage.

The fund is style agnostic and follows an investment approach that is consistent with the business’s other equity investment capabilities. The team performs fundamental bottom-up research and takes long-term views on the companies they invest in. Their investment edge lies in their ability to take meaningful positions in good companies for long periods of time. Whilst we are comfortable with the investment process, the wide opportunity set means that the fund has to demonstrate a high hit consistently to outperform it’s benchmark, which it has not been able to do.

Gavin and the team’s deep understanding of global emerging markets and belief in their investment approach has led them to consistently build high conviction portfolios which we think is positive. However, this hasn’t always led to the right balance of risk in the portfolio. To that end, the investment outcome delivered has been relatively mixed through time. This is in part driven by the relatively dynamic nature of emerging markets which investors have found tricky to navigate, particularly over the past decade.

Coronation recognizes that their approach to risk management in this fund has evolved. Enhancements that they have made to their risk management process include tempering their regional views and was one of the focus areas of our review with them.

When we consider the minor concerns we have with this fund’s approach to risk management, delivered investment outcomes over appropriate time horizons and key man risk associated with Gavin, we feel the fund meets the threshold for a Tier 2 rating. Again, it is important to note that a Tier 2 rating is positive and we will continue to monitor how improvements made to address these concerns play out over a longer period of time.

We have similar minor concerns related to the Global Equity Select fund and have maintained a Tier 2 rating on this fund. Neil Padoa has been managing this fund since 2020 after he took over from Louis Stassen. Chris Cheetham heads up the global research process and is well supported by a team of analysts. In addition, Coronation’s CIO, Karl Leinberger, is actively involved in the global equity process which we take comfort in.

Ultimately, considering changes to the portfolio management structure, similar minor concerns around risk management and a general deepening of Coronation’s global developed markets equity investment capability through time, we feel a Tier 2 rating for the Global Equity Select fund is appropriate.

We have maintained Tier 2 ratings on the global multi-asset funds. These include the Coronation Global Capital Plus, Global Managed and Global Optimum Growth funds where the equity allocations make use of both the Emerging and Developed Markets capabilities to various extents. The fixed income allocations in these funds are significantly influenced by the Fixed Income team, headed by Nishan Maharaj, who currently manages the Tier 2 rated Coronation Global Strategic Income Fund.  Nish’s team also manages the local Coronation Strategic Income and Bond funds which we continue to rate Tier 1.

The Coronation Equity fund is managed by Karl Leinberger and Sarah-Jane Alexander and makes use of Coronation’s SA Equity capability which we rate highly as well as a combination of Coronation’s global equity fund of funds and offshore stocks selected from Coronation’s emerging and developed markets buy lists selected by Karl and Sarah-Jane. Ultimately, our minor concerns with Coronation’s offshore investment processes and the fact that this fund can and does invest meaningfully offshore (as per Regulation 28) mean that we believe a Tier 2 rating is reflective of those minor concerns.

Across Coronation’s other local funds that we cover and are listed below, we have maintained positive ratings, these include the Coronation Top 20 and Market Plus funds managed by Neville Chester and the Aggressive team, the Coronation Balanced Defensive and Capital Plus funds managed by Pallavi Ambekar and the Absolute team and the Coronation SA Equity and Balanced Plus funds managed by Karl Leinberger and the Houseview team.

The table below summarises our prior and current ratings across Coronation’s global fund range, the same ratings apply to the feeder funds.