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Coronation Fund worst performer in SA on mining slump

Resources Fund down 35.9% in 2015.

Coronation Fund Managers, the South African money manager that oversees more than $40 billion, is on course to have the country’s worst-ranked fund for 2015 after a slump in commodity prices.

The Coronation Resources Fund has declined 35.9% this year, according to data compiled daily by FundsData Online. The fund, which has Anglo American, BHP Billiton, Sasol, Exxaro Resources and Glencore as its five biggest holdings, underperformed its benchmark, Johannesburg’s resources index, by 5.9% by the end of October, according to a fact sheet on the Cape Town-based fund manager’s website.

“Resources are highly stressed,” Karl Leinberger, chief investment officer of the company which manages about R610 billion ($42.5 billion), making it the country’s largest manager of third-party assets. “Seven years ago, we were very negative on resources and thought they were overvalued. Today we’re think they’re undervalued, but don’t expect a turnaround any time soon.”

Resource stocks in South Africa have been hit hard by the global decline in the price of commodities. At Coronation, which recorded R15.3 billion in outflows and a 9% decline in net income to R1.8 billion for the year ended in September, it’s not just the resources fund that’s slipping — seven of its 10 so-called flagship funds are underperforming their benchmarks.

“You look like an idiot and then in two or three years’ time the cycle turns and you look like a hero,” Leinberger said on Thursday by phone from Cape Town. “We’re a long-term manager. This kind of under performance isn’t meaningful if you look at our 22-year track record. Our performance over 10 and five years is excellent still.”

Coronation, taking the view that some resources stocks are cheap, bought Anglo American, Exxaro and platinum miners this year, Leinberger said. The fund manager’s preferred picks among producers of the precious metal are Northam Platinum and Impala Platinum Holdings, he said.

There’s no near-term catalyst in sight that will boost demand for commodities and drive the prices of resource shares higher, he said. “There are big disconnects between price and value at the moment. We think we’ll deliver compelling results in the years ahead.”

©2015 Bloomberg News

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The problem for Coro. is not that of a sour bet on their resources fund.

The BIG problem for Coro. is how do they justify putting some of these shares into their Capital + Fund. This fund is touted as ideal for retired investors to draw an income from. viz Living Annuity investors. With no prospect of a reasonably early return to sane pricing levels what do LA investors do? Just suck it up and take a reduced income?

From their fact sheet:

“Pensioners and other investors requiring an income, especially those in the first half of retirement.
Living annuity investors seeking a fund that aims to achieve both income and capital growth.
Investors requiring a low-risk fund, which offers a reasonable rate of return, for their retirement annuity, provident fund, preservation fund or pension fund.
Conservative investors who want to protect their savings.”

For pensioners the is NO prospect of long term anymore other than for a small number.

Mega failure by Coronation on a par with Allan Gray investing in oil and in Russia and RE:CM investing in everything that they should not have invested in.

End of comments.

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