Notes from my inbox

MANY HAPPY RETURNS!

2019 brought much-needed relief for our investors. Returns across most asset classes were ahead or in line with the expected outcomes and our funds benefited from strong outperfor­mance by our equity picks across local, emerging and developed markets. Coronation Top 20 (+15.9%; 5.4% ahead of benchmark), Coronation Global Emerging Markets (+31.3%; 15.8% ahead of benchmark), and Coronation Global Equity Select (+33.9%; 10.4% ahead of benchmark) all had exceptional years. Our multi-asset funds exceeded or matched their long-term real return objectives, with Coronation Balanced Plus, Coronation Capital Plus and Coronation Balanced Defensive beating inflation by 8.7%, 5.1% and 5.4%, respectively. While these pleasing outcomes were enough to ensure that returns for the past decade created real wealth, our local funds’ medium-term returns are still somewhat weaker than we would like them to be. We remain confident that enough attractive opportunities are available today to expect good returns from our funds over the next decade. You can read more about the performance and positioning of specific funds in the summary on page 29 or via the detailed fund commentaries available on our website.

TRUST DEFICIT

Communications firm Edelman recently released their trust barometer. They make the point that trust is granted on two distinct attributes: competence (delivering on your promises) and ethical behaviour (doing the right thing and working to improve society). Globally, their survey respondents perceived business as competent but not ethical, NGOs as ethical but not competent, and the media and government as both unethical and incompetent. The South African government scored by far the lowest of the 28 survey countries on both the competence and ethical metrics. This trust deficit is the root cause of the sorry state of our economy, as it undermines confidence, reduces investment and thus limits the potential growth rate.

Many structural issues that are perceived as intractable have their roots in this. With evidence of more ethics and integrity, issues that today look nearly unmanageable may come to be seen as solvable for the greater good. Competent land reform that supports labour-intensive small-scale farming may, under these conditions, be reframed as a necessary mechanism to deal with inequality and unemployment rather than a needless attack on property rights; National Health Insurance may be understood as a rational public-private partnership to roll out higher quality health care for more South Africans, rather than a cynical attempt to gain control over private medical aid premiums; and a larger tax and debt burden may be seen to assist with restructuring electricity supply and Eskom as a necessary contribution to a just transition from fossil fuels to renewable energy, rather than being forced to throw more money down a bottomless pit of corruption and inefficiency. President Cyril Ramaphosa acknowl­edged in a recent letter to the nation that a capable State starts with the people who work in it, who should be hired only based on skill, and should be held accountable for their actions. Time will tell whether there is enough commitment to these fine words for trust in government to grow.

IN THIS EDITION

Economist Marie Antelme reviews the very challenging current fiscal conditions from the perspective of a similarly tough period in the early 1990s here. Portfolio manager Neville Chester reviews the case for investing in local equities despite an unsupportive economic environment here. Portfolio manager Siphamandla Shozi unpacks the investment case for Distell. We have also asked our Personal Investment team to share their top wealth creation tips for the next decade, which you can find here.

Thank you for your continued support. We know that we would not be here without you. As always, I invite you to let us know if there is any aspect of our service to you that did not live up to expectations. You can mail us at clientservice@coronation.com. Good luck out there.