‘A phenomenal business,’ says Martin Jankelowitz.

HILTON TARRANT: Hugo Nelson is the CEO of Coronation Fund Managers and joins us now. Hugo, preliminary results for the year to September out today. Diluted headline earnings per share up 24%, the dividend up 9%, your assets under management up strongly and, you say it yourself, it belies the extremely volatility we've seen in the markets.

HUGO NELSON: Yes. And for SA it has been a challenging year, a tale of two halves, really. We reported negative growth at the interim stage and it's very, very pleasing to be able to report positive growth for the full year. I think largely our year has sort of turned with the bottom in the market in March, and the second half has been phenomenal.

HILTON TARRANT: Hugo, has it been more difficult to attract investors in this environment? There are a lot of doubts in the market place, a lot of distrust or questions. One would feel that investors would tend to trust the more established players versus some of the new boutique managers you find in the market.

HUGO NELSON: Well, it's really a global phenomenon. In South Africa as well as the rest of the world there is a huge amount of cash sitting in what are effectively money-market funds, and at one point in March the aggregate vale of those funds in the US actually exceeded the market cap of the S&P500, which is a very strong indicator that asset prices are unbelievably depressed. And I think the big issue with investors is that the big difficulty, the big equation that challenges them is that the whole real equation is that very often people go for cash as an investment vehicle or as an asset class because they are very conscious about preserving the capital - and that's a fair consideration. But in order to provide for long-term savings needs, one does have to take risk in order to get real returns which beat inflation. So it has been a difficult period, as you say, to convince people that they need to take that risk. And I think that indications are that that is starting to change. And, over the medium term, as long as asset prices aren't too volatile, one should start to see that cash move into risk assets or equity assets.

HILTON TARRANT: There's been a big increase in new business in your retail division, especially towards the end of the reporting period. Has this continued accelerating?

HUGO NELSON: I'm not sure if it has continued accelerating, but in the last quarter we have seen significant change; in other words, from negativity to actually people wanting to invest in the equity products, and that persists.

HILTON TARRANT: Just looking at the lows we reached in March, are you confident that we have seen the bottom, and that that's all history?

HUGO NELSON: I think that March is the point of maximum pessimism, or was the point of maximum pessimism. Really, asset prices were discounting absolute Armageddon, the end of the world, complete failure of the banking system. So I think that is behind us. Governments around the world have worked incredibly hard to start oiling the banking system again. I don't think we are completely out of the woods in terms of the functioning of those entities, but certainly governments around the world are going to continue until they get to the point where those entities are functioning the way they should.

HILTON TARRANT: A dividend of 50c/share, up 9% - plans to grow this into the future?

HUGO NELSON: Our policy is a very simple one. Our business doesn't require a lot of cash, so what we do is pay out 75% of all cash generated at any point in time, and that's what the dividend represents. To the extent that we are able to grow earnings into the future the dividend will commensurately track that.

HILTON TARRANT: Hugo Nelson is the CEO of Coronation Fund Managers.
    Martin, a very good set of numbers?

MARTIN JANKELOWITZ: Absolutely. A brilliant business. As Hugo said, it's a tale of two halves. It's been a  challenging period. You could argue from last year August a part of their base already had a lower depressed level element to it. But nevertheless a very challenging environment and delivering a very, very good set of results.

HILTON TARRANT: They managed to perform as well.

MARTIN JANKELOWITZ: Absolutely. A phenomenal business.

• Subscribe to a daily email of transcripts from Moneyweb Radio - click here

COMMENTS

View disclaimer

 

responses to this article

Name
Subject
Comment

View disclaimer