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Coronation releases acceptable results in challenging market environment: Anton Pillay – CEO, Coronation Fund Managers

Year-end results. ‘We are still seeing good inflows into the multi-asset products.’

SIKI MGABADELI: Coronation Fund Managers say they’ve delivered a credible set of results amid deteriorating global growth and the withdrawal of funds from emerging-market equities and currencies. Coronation reports a 9.7% decline in headline earnings per share to 516c and a 7% drop in revenue to R4.4bn in the year to end-September. That’s compared with the year earlier period.

Anton Pillay is CEO and joins us now. Anton, thanks so much for your time today. So – could it have been worse?

ANTON PILLAY: The market’s been very volatile and it intensified throughout the financial year. I think from a management point of view we are very comfortable with a credible set of results that we’ve delivered, and it is in line with our expectations.

SIKI MGABADELI: It is a cyclical business.

ANTON PILLAY: Correct. We’ve made that point in the past that, as a cyclical business, our revenues are highly geared to both the market returns and the alpha that we generate. And we’ve come off what we consider to be an abnormally high base in the past few years.

SIKI MGABADELI: So when you are in these dips you are in there’s moments where people make their outflows and I suppose inflows. How do you keep your equilibrium as a business?

ANTON PILLAY: From an asset-management point of view and an investment point of view we manage money for the long term. We apply a long-term valuation-driven approach to investing. Over our 22 years of being in business this tried and tested process of investment has stood the test of time and it has delivered exceptional long-term performance for our clients.

SIKI MGABADELI: The outflows from emerging markets – is this something you expect to continue for a while? Where are we in this cycle?

ANTON PILLAY: With reference to the Sens, it’s really with reference to the abundance of very free money floating around the world looking for yield. And those withdrawals are now taking place given the prospect of the Fed hiking their rates at some point. And from our international product point of view, in terms of the R12.5bn that we’ve received into our product range, our international product range, the bulk of that has gone into our global emerging market products.

SIKI MGABADELI: That was actually my next question. Where are you seeing the most inflows going into in terms of year own product range?

ANTON PILLAY: From a product range point of view look at the retail side. We are still seeing good inflows into the multi-asset products. The industry as a whole, in terms of net inflows, has declined, specifically in the long-term asset management sector in the unit-trust environment. We’ve seen the flows decline from R130bn to just in excess of R80bn over the last year.

SIKI MGABADELI: How has your institutional business performed?

ANTON PILLAY: Our institutional business has performed exceptionally well in terms of the inflows that we received over the past years. This year we did experience an outflow, predominantly from our local institutional business. That accounted for about R34bn worth of outflows. It was really on the back of the decision we made about three, four years ago to close our multi-asset and our equity strategies to new clients, specifically on the institutional side of the business. And when you combine that with a declining formal pension-fund market, the outflows we experience are not out of line with our expectations.

SIKI MGABADELI: Let’s talk Africa. You have your Specialist African Equity portfolio. What sort of activity have you been seeing there?

ANTON PILLAY: That fund is soft-closed. However, if you look at the alpha it has generated since inception, which is about seven, eight years, it has generated alpha of about 6%, which is still an exceptional level of outperformance.

SIKI MGABADELI: And your outlook, then?

ANTON PILLAY: For the year ahead, we see the likelihood of continued near-term volatility persisting. But, as disciplined and rational allocators of capital, we are committed to identifying those operations that will generate long-term performance across all our client portfolios.

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