Manager Research

Three equity analysts, Pieter Hundersmarck, Kyle Wales, and David Cook, have resigned from the Coronation Global Emerging Market (GEM) team effective 31 July 2016. This is a setback for the business as they increasingly focus efforts on building a globally competitive investment capability.

Outside of the two key portfolio managers (Gavin Joubert and Suhail Suleman) these were the three most experienced GEM team members, having been with the business for between 6 and 8 years. Coronation has been developing their global investment capability over the past few years. While GEM has been running for almost 10 years, their global equity process (under Louis Stassen) is a newer addition. The GEM and Global teams interact quite closely with cross-sharing of research responsibilities. With the combined global analysts team now numbering 13, the individual research responsibilities from the departing members are quite easily reallocated across the broader team. In many cases, fresh eyes on existing portfolio stocks is a net positive.

Portfolio management responsibilities remain the same, under Gavin and Suhail. Where Coronation is still developing in this regard is in their succession management and the development of portfolio managers. Their multi-council process (along similar lines to Capital in the US and Allan Gray locally) is still in its early phases, so the impact on the portfolio management process is not material. It is worthwhile pointing out the merits of this approach to managing money (where individual portfolios are split across co-managers). In a scenario like this where key individuals depart, the impact on portfolio management is relatively muted as responsibilities are internally reallocated – with key man risk being substantially lower than where an individual carries sole responsibility. This will be increasingly positive for Coronation as it develops the multi-council process.

The departing analysts will be joining the Old Mutual Investment Group to help set up and manage their Global Equities capability. Although they will be leaving at the end of July, they all have restraint of trades and will only start at Old Mutual in May 2017.

Market followers will be aware that Old Mutual is being restructured under the leadership of Bruce Hemphill (ex Liberty/Standard Bank). It will result in two separate businesses, with an SA based emerging markets focussed business being the SA Listed entity. As a result we are likely to see more “people movements” in the coming months due to OM. Building genuine globally-competitive fund offerings from an SA base is extremely difficult so we will be watching OM’s developments with interest. The three new recruits are experienced analysts, but have very little portfolio management experience (particularly across developed market equities), so it seems OM still has some way to go. That being said, in the UK the OM brand is known as an investment employer of choice and has been able to attract some of the leading candidates in that market.

For now the strengths of Coronation are coming to the fore to protect the integrity of the investment process, and with their considerable depth and very well organised structures we have little concerns around the long term ramifications of this change. Clients should not be worried about the impact of this change. We will continue to monitor business changes and the development of the global capabilities at Coronation.