The Coronation Financial Fund is designed for those that want to invest in a fund that makes investments in bank stocks, insurers, and other financial intermediaries. Those that believe an investment in banks and insurance companies is more compelling can invest without having any issues. An investor will get consistent returns over a long period of time.
The fund encourages investors to hold investments in the fund for a period of not less than 5 years. This is because the fund provides better returns over a longer investment period.
The Coronation Financial Fund invests in JSE-listed companies and has remained invested in JSE companies to date. The fund was established on July 1st, 1998 in an effort to encourage those who want to diversify their investment portfolio by investing in a fund that invests in financial institutions. Today, the fund has invested 100% of its assets in growth assets, which are mainly composed of banks.
Over its existence, the fund has had its ups and downs but has managed to grow over the years. The fund can be volatile at times, and it is more volatile than a unit trust that invests in bonds or diversified equities. The fund has recorded highs of 53.6% and lows of 45.4%. A fund like this isn’t meant for a short-term investor.
There are funds available for short-term investors, which include those that invest in money market instruments. Nonetheless, the fund has high returns over time and is promising for a long-term investor. Before you invest in the Coronation Financial Fund, read further below to get a much better understanding of the fund.
The Coronation Financial Fund is discussed in greater detail below:
Coronation Financial Fund summary
The Coronation Financial Fund is a unit trust that invests in financial institutions that are listed on the JSE. The fund was established on July 1st, 1998 and is valued at R363.9 million as of 2022. Each unit in the fund is sold at R61.47. Since its launch, the Coronation Financial Fund has managed to grow by 1196.6% and has averaged annual growth of 11.3%. The benchmark has grown by 877.8% since the fund’s inception and during the period averaged an annual increase of 10%. In essence, the fund has outperformed the fund by 1.3% on average.
The Coronation Financial Fund is clearly a great performing fund. However, it has its own downsides. The fund fluctuates more than an average fund would, and Coronation has rated the fund as an aggressive fund by giving it a 10/10 when it comes to risk. Coronation’s classification of the fund is true due to its performance.
The fund has had the lowest annual return of 39.5%, which is very high for any fund. This feat was achieved between April 2019 and March 2020. The fund is also able to achieve high returns for investors. From August 2004 to July 2005, the fund achieved a growth of 63%, which is the highest annual increase the fund has ever achieved.
Achieving such high returns on investment requires sceptical investment strategies. The fund is managed by some of the top fund managers in South Africa. The fund invests 99.4% of its funds in equities. As of 2022, the fund invests in equities in the financial sector, which makes up 96.3%, and it invests 3.1% of the fund in insurance companies. The remaining 0.6% of the fund is held in cash.
Coronation Financial Fund invests in a number of companies to achieve its objectives. Here are the top 10 holdings of the fund.
Top 10 holdings of the Coronation financial fund 2022
| # | Company | Fund Percentage |
| 1 | FirstRand Limited | 24.6% |
| 2 | Standard Bank of South Africa Ltd | 16.2% |
| 3 | Nedbank Ltd | 9.6% |
| 4 | Sanlam life assurance limited | 7.9% |
| 5 | Capitec Bank Holdings Ltd | 6.6% |
| 6 | RMI holdings | 5.4% |
| 7 | Discovery Holdings Ltd | 5.1% |
| 8 | TRANSACTION CAPITAL | 3.5% |
| 9 | Remgro Ltd | 3% |
| 10 | PSG Group | 2.7% |
How the Coronation financial fund works
The fund invests 99.4% of its portfolio in stocks, and as such, the fund fails to meet the threshold set in Regulation 28 of the Pension Funds Act 24 of 1956. The Regulation states that the fund must invest not more than 75% of the portfolio in equities to qualify for retirement investments. Therefore, retirement investments under the Coronation financial fund cannot be made.
Different types of investments can be placed in the Coronation financial fund, except those related to retirement. These may include but are not limited to ordinary investments and savings investments. It is recommended that an investment in the fund be kept for at least 5 years. An investment in the fund requires a minimum contribution to be met.
There are two ways to make contributions to the fund. One can invest by making a monthly debit order contribution of not less than R500.00 per month. Alternatively, a once-off investment of R5,000.00 or more can be made to invest in the fund. The investment made in the fund will be used to buy units of the fund.
One’s holding will be determined by the number of units held. The fund distributes income semi-annually in March and September of every year. An annual management fee will be charged, which is fixed at 1.25% (VAT exclusive). Transaction costs and fund expenses are also charged.
Advantages of the Coronation Financial Fund
- The fund has two ways of making contributions.
- Different types of investments can be invested in the fund.
- The minimum contribution for monthly debit orders is low.
- The fund has managed to outperform its set benchmark year over year since its inception.
- Long-term investments tend to earn more interest on their principal.
Disadvantages of the Coronation Financial Fund
- The fund is not Regulation 28 compliant.
- Short-term investment exposes capital and the money invested may decrease by huge amounts.
Conclusion
Long-term investment goals must be in mind when investing in the Coronation financial fund since it is volatile and yet produces favourable returns over time. This fund is meant to supplement other investments in an investment portfolio and it is a good option for those that invest in multiple funds.
