2016 COMPELLING CASH ALTERNATIVESSubscribe to Newsletter
Investors who require an immediate income from their capital, or part of their capital, can invest in two managed income funds on offer from Coronation: the domestic flagship Coronation Strategic Income Fund and its dollar-denominated sibling, the Coronation Global Strategic USD Income Fund.
To have a reasonable chance of achieving a better return than a term deposit, investors need exposure to assets with a higher expected return than cash.
2015 was a difficult year for emerging markets and South Africa in particular. The economy’s deteriorating growth outlook, concerns around government finances, and an increase in both socioeconomic unease and political uncertainty, contributed to a slump of 25.2% in the rand over the course of 2015. This weighed on local government bonds, and intensified negative sentiment during the final quarter of the year, which resulted in a marked widening in bond yields.
The global environment remains plagued with concerns of a more pronounced slowdown in China, a European economy that is struggling to lift itself out of recession and the impact of the first interest rate hike in the US following the financial crisis of 2008. The commodity slump added pressure on many emerging market countries, which combined with high levels of uncertainty (as reflected in an increase in asset price volatility) left their currencies battered.
Strategic Income and Global Strategic USD Income have benefited from having exposure to assets with a higher expected return than cash. In the case of Strategic Income, over the 15 years since its inception in July 2001 the fund has delivered an annualised return of 10.6%* (which is roughly 2.7% p.a. ahead of cash after fees). In turn, albeit over a far shorter period (since the start of 2012), Global Strategic USD Income has delivered an annualised US dollar return of 2.9%* (2.6% p.a. ahead of cash after fees).
Coronation offers a range of funds that cater for the majority of investors who are investing for immediate income. These funds share the common Coronation DNA of a disciplined, long-term focused and valuation-based investment philosophy. Details of the funds are included in the adjacent table.
We take an active approach to fixed interest portfolio management. All investment decisions are driven by proprietary research across the full spectrum of potential return enhancers. These include duration and yield curve positions, off-benchmark positions through inflationlinked assets as well as yield enhancement through credit enhanced assets.