An attractive alternative to investing in cash offshore

CHRISTO LINEVELDT Personal Investments Specialist, Coronation Fund Managers

Investing offshore right now may seem like a risky endeavour when stocks are trading at record highs and income investments at record lows. Add a global pandemic to the background, which is presenting a unique inflationary risk, and it’s understandable why investors may be preferring the safety of cash.

However, traditionally considered low-risk assets, fixed interest instruments are now exhibiting more downside risk than ever before. For example, approximately 25% of global bonds have negative yields, while a further 65% yield less than 1%, representing a returnless risk. At the same time, the five-month rally in US equities out of a bear market slump has raised concerns that stock markets may have moved too far, too fast to justify their elevated valuations.

Enter the conservative multi-asset fund

In a lower-for-longer interest rate environment, cash effectively yields 0% in the developed world. Thus, if you want to achieve consistent real returns in hard currency but cannot tolerate risk, a better alternative to consider is a well-diversified conservative multiasset fund that is managed with an absolute mindset.

Investors who want to incorporate more conservative offshore exposure in their portfolios, while still achieving reasonable real returns of between 2% to 3% in USD over time, will find this in the Coronation Global Capital Plus Fund.

The Fund is actively managed, has a low-risk exposure and is invested across asset classes. While it contains some of our best investment ideas for global growth, it has been moderated for investors with less tolerance for risk.

Global Capital Plus is globally unique, given that it is a balanced fund that has dual objectives: delivering a respectable real return while keeping a careful eye on risk. It gives investors access to asset classes that will outperform cash and inflation over time, with a mandate that allows for more than half of the portfolio to be invested in growth assets.

Optimised for risk first

The investment philosophy of the Fund is the same as our medium-risk global balanced fund but is optimised for risk first. As such, it is invested in growth assets such as equities, real assets (such as infrastructure and property) and equity-like fixed interest income instruments. The balance of the portfolio is invested in assets that offer inflation protection, absolute returns and capital preservation.

The Fund is managed to preserve the dollar value of the Fund over rolling 12- to 24-month periods. Bear in mind this target is not guaranteed, but investors in the Fund do get access to Coronation’s 21-year track record of managing global multi-asset class funds. As such, the Fund is comfortably positioned in the top quartile of similar global funds that are available to South African investors over five and ten years, as well as since inception. For the period since launch, the A-class of the fund has delivered a return of 3.9% per annum in US dollars, compared to the per annum return of 0.5% from US dollar cash.

Drawing on the breadth and depth of an integrated global investment team

Since launching our first global fund, Coronation has built up substantial international investment expertise and research capabilities, implemented by an integrated global investment team of 70 professionals, with an average of more than 14 years in the industry and just over 10 years with Coronation.

As a bottom-up, active investor, we do proprietary research on the available investment opportunities across the world. We then blend the most promising investment opportunities we have identified into resilient portfolios that are tailored to deliver risk-adjusted returns that meet our investors’ needs – no matter how challenging the global environment may be.

Comprehensive fund information is available in the minimum disclosure document available on coronation.com.