Coronation comeback

Coronation’s assets under management are returning to all-time highs as the asset manager bounces back from a tough few years.

Coronation recently released an update on its assets under management (AUM), which are now R632 billion.

This is slightly less than the R633.83 billion Coronation boasted in 2021 – the highest in the asset manager’s history.

The year after the company reported this figure, South Africa’s moribund economy saw Coronation’s AUM fall to R574 billion. It recovered slightly the year after, in 2023, reaching AUM of R602 billion.

Therefore, Coronation’s latest AUM returns to near-peak levels – a good sign for the company, which has been under severe pressure for the past few years.

Like many local asset managers, Coronation saw its AUM decline during the COVID-19 pandemic. In 2020, Coronation reported its lowest AUM since 2013, at R569 billion.

In its 2020 results presentation, Coronation explained that Covid-19 plunged the global economy into a deep recession and that the path to recovery remains uncertain.

“Coronation’s closing assets under management (AUM) as of 30 September 2020 is flat at R569 billion, reflecting the effect of positive performance across our funds and strategies, offsetting the impact of net client outflows,” it said. 

“As a large player within the domestic savings industry, net client outflows should be expected in periods when economic conditions are tough and investor sentiment is negative.”

In 2021, Coronation saw a massive rebound, reporting its highest-ever AUM.  

“Strong outperformance of the underlying markets in client mandates contributed to excellent results for the 12 months ended 30 September 2021, with revenue and earnings from fund management up 17% and 23%, respectively, from the prior year,” the asset manager said in its results. 

“We believe that the outperformance enjoyed by our clients results from an unwavering commitment to active, long-term investing, in-depth proprietary research and the benefits that come from a stable and experienced team.”

“However, as we did in our interim results report in May, it is worth reiterating that these results benefited from a cyclical high in performance fees that will normalise in the years to come.” 

Despite this impressive growth in AUM, Coronation reminded shareholders that “as an investment-led business, our primary focus remains on growing the value of the client assets entrusted to us over the long term, rather than simply looking to grow the pool of assets under our management”.

Coronation’s prediction that its results would moderate became true a year later when its AUM dropped to R574 billion in 2022. In 2023, it rose again to R602 billion.

The growth in Coronation’s AUM since its inception can be seen in the graph below.

Going forward

Aside from South Africa’s stagnant economy, one of Coronation’s biggest challenges over the past few years has been its decades-long battle with the South African Revenue Service (SARS), which finally ended this year. 

The dispute began in 2012 when SARS assessed that the profits of Coronation’s Irish subsidiary, Coronation Global Fund Managers (CGFM), should be included in Coronation’s South African taxable income, as CGFM was considered a controlled foreign company (CFC). 

Coronation argued that CGFM qualified for the foreign business establishment (FBE) exemption, which would exclude its income from being taxed in South Africa.

Initially, the Tax Court sided with Coronation, but the Supreme Court of Appeal (SCA) later ruled in the taxman’s favour, determining that CGFM’s outsourcing of investment management functions disqualified it from the FBE exemption. 

However, the Constitutional Court ultimately reversed this decision, finding that CGFM’s primary activities were fund management, not investment management, thus meeting the FBE exemption criteria. 

This win was not only a major blow to SARS but saved Coronation almost R800 million in taxes. 

With this burden now removed from the asset manager’s plate, Coronation can look ahead and focus on growing its business.

“Coronation is a Top 100 JSE-listed company, a leading South African asset management firm, and a household name, positions we have worked hard to earn,” the asset manager said in its latest interim results.

“We have operated successfully through numerous cycles and remain a resilient, well-capitalised and sustainable business.” 

“We will continue to invest in our business and remain committed to delivering superior long-term investment returns while fulfilling our role as an active and responsible investor, employer and corporate citizen.”