CORONATION Fund Managers’ fund management earnings a share fell 12 percent to 214.8 cents as the normally cyclical business began to normalise after a period of strong performance.
The interim dividend fell by 12.3 percent to 214 cents, from 244.0 cents in the prior corresponding period.
“After a period of earning elevated levels of fund management fees, due to exceptional portfolio performance resulting from opportunities presented by the Covid-19 pandemic, earnings have started to normalise,” CEO Anton Pillay said.
“This is in line with our expectations and we anticipate ongoing market volatility given the impact of unfolding and unpredictable macro events. We remind shareholders that as a cyclical business, our earnings are linked to our active management, valuation-based portfolio positioning and market performance,” he said in a statement yesterday.
Fund management earnings are used by management to measure operating financial performance, which excludes the net mark-to-market impact of fair value gains and losses, and related foreign exchange, on investment securities held.
Pillay said the start of 2022 had brought dramatic and rapid changes to the global political economy.
Just as the world was returning to a post-pandemic normal, Russia invaded Ukraine in February, which sent markets tumbling and saw existing geopolitical fault lines broaden.
“While somewhat less than recent reporting periods, as well as estimates of the outflows being experienced by the South African savings pool, Coronation continued to experience net outflows representing 2 percent of average AUM.
“We expect Coronation’s flows to continue reflecting those of the broader savings industry and the prevailing economic conditions in which we operate. These are both likely to remain under pressure for some time to come,” said Pillay.
Assets under management increased by 8 percent to R646bn in the interim period, while closing AUM was down 1 percent to R625bn.
He said their focus remained to grow the value of client assets over the long term, rather than simply looking to grow their pool of assets under management.
Operating expenses fell by 13 percent to R948m. Variable expenses responded to the reduction in revenue, highlighting the strength of the variable cost model, which Pillay said he expected would continue to offer shareholder protection.
While variable costs decreased by 21 percent, fixed expenses were relatively contained, remaining flat year on year, he said.
The group operates in an environment where it needs to continually invest in operations, which makes it challenging to contain fixed costs below inflation. Areas that require ongoing investment include compliance, client reporting, information technology and information systems.
The fund management industry has faced some criticism recently from studies showing a relatively slow pace of racial and gender transformation. However Pillay said that as a Level 1 B-BBEE contributor, some R279bn of Coronation’s AUM was managed by black investment professionals.
As at March 31, 2022, 50 percent of its employees were women; 61 percent were black, of whom 58 percent were black women. And for the six months, 83 percent of new hires were black and 42 percent of new hires were women.
Of the board, 80 percent of the directors were black and 50 percent were women. Key senior leadership positions occupied by black individuals included CEO, CFO, COO, Head of Institutional Business and Head of Fixed Interest. In addition, Coronation is 29 percent black owned.
BUSINESS REPORT