Download Coronation Granite Fixed Income Fund Fact Sheet

CORONATION GRANITE FIXED INCOME FUND
as at 31 May 2016
Limited liability partnership
ZAR
01 October 2002
R1 million
Domestic Fixed Income
Cash + 3%
Cash + high-water mark
1% (excl. VAT)
20% (excl. VAT)
Liquidity
Exit fees
Fund AUM (R'Million)
Notice period
Reporting
Portfolio manager
Monthly
Not applicable
R 367.14
1 month
Monthly
Mark le Roux, Adrian van Pallander &
Nishan Maharaj
Ernst & Young
Investment Data Services
Auditor
Administrator
INVESTMENT OBJECTIVE AND STRATEGY
PERFORMANCE SINCE INCEPTION
Sharpe ratio (annualised since inception)
Sortino ratio (annualised since inception)
Index correlation (ALBI)
Number of longs
Number of shorts
Fund
Jul-15
Feb-16
Dec-14
Oct-13
May-14
Mar-13
Jan-12
Aug-12
Jun-11
Apr-10
Nov-10
Sep-09
Jul-08
ALBI
Feb-09
Dec-07
0.28
0.42
Oct-06
1.40
2.35
4.1%
37
16
FRODS
0.6%
167.4%
7.5%
6.26%
5.7%
5.5%
12.3%
4.9%
100.0%
100.0%
0.6%
May-07
ALBI
-1.5%
241.1%
9.4%
0.96%
4.4%
7.1%
23.6%
-5.6%
70.1%
50.0%
7.0%
4.6%
-6.7%
-1.4%
-7.9%
Mar-06
Fund
0.9%
274.5%
10.1%
7.46%
7.4%
7.6%
17.3%
6.4%
99.4%
100.0%
1.9%
1.1%
-1.2%
-1.2%
-1.2%
FRODS
MONTHLY RETURNS (Net of Fees)
4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
-2.0%
Oct-02
Apr-03
Oct-03
Apr-04
Oct-04
Apr-05
Oct-05
Apr-06
Oct-06
Apr-07
Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Apr-10
Oct-10
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
Oct-14
Apr-15
Oct-15
Apr-16
Monthly return
Total return
Average annualised return (since inception)
1 Year Return
3 Year annualised return
5 Year annualised return
Best 12-month rolling return
Worst 12-month rolling return
% positive months (since inception)
% positive months (last 12 months)
Standard deviation (annualised since inception)
Downside deviation (risk free since inception)
Largest monthly drawdown
Average monthly drawdown
Largest cumulative drawdown
Jan-05
PERFORMANCE AND RISK STATISTICS
Aug-05
Sep-02
The fund is expected to have low volatility with a very low correlation to the All Bond Index (ALBI).
Investment decisions are driven by fundamental proprietary in-house research. The fund’s target
return is cash plus 3%. The objective is to achieve this return with low risk, providing attractive riskadjusted returns through a low fund standard deviation.
Jun-04
The Coronation Granite Fixed Income Fund makes use of six core and distinct fixed income
strategies, namely: Directional View Taking, Yield Curve Positioning, Corporate Credit Opportunity,
Arbitrage, Quantitative and Relative Value Trades in the pursuit of producing consistent absolute
returns independent of general market direction.
Apr-03
400.00
380.00
360.00
340.00
320.00
300.00
280.00
260.00
240.00
220.00
200.00
180.00
160.00
140.00
120.00
100.00
Nov-03
Investment structure
Currency
Launch date
Minimum investment
Fund category
Target return
Performance fee hurdle rate
Annual management fee
Annual outperformance fee
COMPARISON OF CONSISTENCY OF RETURNS
4.0%
HISTOGRAM OF MONTHLY NET RETURNS
3.0%
90
2.0%
80
1.0%
70
0.0%
60
-1.0%
Frequency
50
-2.0%
-8.0%
40
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
All Bond Index
30
EXPOSURE BY UNDERLYING STRATEGY
20
Current
Value (+1bp)
Value
10
Directional Strategy
Relative Value Strategy
Switch Strategy
Credit Strategy
Real Directional Strategy
Residual Strategy
Prime Brokering
Less -2.00% -1.50% -1.00% -0.50% 0.00%
than 2.5%
MONTHLY PERFORMANCE RETURNS (NET)
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
SOUTH AFRICA
Jan
0.69%
0.43%
0.11%
0.46%
0.74%
0.77%
0.65%
3.49%
1.76%
0.88%
1.38%
0.08%
0.48%
1.41%
Feb
1.01%
0.69%
0.53%
0.58%
0.63%
0.99%
0.78%
1.95%
0.68%
1.27%
1.81%
-1.22%
0.82%
0.46%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00% Greater
than
3.5%
May
0.92%
0.60%
0.57%
0.47%
0.55%
0.80%
0.67%
0.77%
1.09%
0.99%
0.91%
0.37%
0.82%
1.46%
Jun
Baskets
Mar
0.61%
0.55%
0.71%
0.29%
0.44%
0.68%
1.72%
0.92%
0.27%
0.82%
0.56%
3.16%
0.47%
1.30%
Apr
0.68%
0.65%
0.60%
0.58%
0.60%
0.95%
0.70%
0.53%
0.47%
0.93%
0.28%
0.61%
0.00%
1.18%
Tel: +27 21 680 2000 | Fax: +27 21 680 2100 | [email protected]
0.57%
0.86%
0.37%
0.61%
0.43%
0.32%
0.55%
0.71%
0.25%
0.97%
1.67%
0.65%
1.06%
Jul
0.55%
0.72%
0.78%
1.10%
0.72%
1.21%
0.73%
0.60%
0.16%
0.91%
0.30%
0.04%
1.19%
Aug
0.63%
0.56%
0.62%
0.75%
0.82%
1.23%
0.58%
1.24%
1.10%
0.68%
0.61%
0.13%
1.16%
Sep
0.48%
0.45%
0.82%
0.34%
1.43%
0.79%
0.57%
1.11%
1.15%
0.80%
1.16%
0.50%
1.27%
Oct
0.60%
0.80%
0.77%
0.68%
0.34%
0.31%
0.65%
1.03%
0.10%
0.79%
0.97%
3.01%
0.89%
Point
-219 321
13 174 010
698 821
146 284 115
1 356 698
85 476
10 714 982
-212 600
13 174 010
146 285 358
1 356 698
85 476
10 720 550
Nov
Dec
0.45%
0.20%
0.54%
1.02%
0.73%
0.78%
1.09%
1.12%
0.23%
1.23%
1.29%
1.70%
0.75%
Rand per
0.03%
0.79%
0.60%
0.58%
0.56%
0.56%
0.59%
1.36%
1.11%
1.04%
0.84%
0.75%
0.83%
6 721
-32
1 243
5 568
Total
3.97%
6.41%
7.12%
7.10%
8.34%
9.62%
10.16%
13.11%
12.05%
9.36%
11.41%
10.21%
9.73%
13.74%
www.coronation.com
CORONATION GRANITE FIXED INCOME FUND
as at 31 May 2016
MONTHLY COMMENTARY
The fund returned 0.92% in May, taking the one-year return to 7.46%. This leaves the fund return 1.20% ahead of cash over the last 12 months.
May was a poor month for domestic markets, including the bond market, which gave away some of the gains made in March and April. The All Bond Index (ALBI) fell by 1.49% in
May, with longer-dated maturities delivering the weaker performance. Bonds with a maturity of 12 years or longer lost 2.03%, compared to those with maturities of one to three
years that returned 0.3%. Inflation-linked bonds delivered a return of -0.55%, while the cash return was strongest at 0.62%.
Table 3 : Bond and Money Market (local currency returns)
Code
ALBTR Index
GOVTR Index
OTHTR Index
JSEI06TR Index
JSEI02TR Index
JSEI03TR Index
JSEI04TR Index
Name
All Bond
GOVI
OTHI
Bonds 1-3 Years
Bonds 3-7 Years
Bonds 7-12 Years
Bonds 12+ Years
May
2016
-1.49%
-1.44%
-1.63%
0.31%
-0.67%
-1.80%
-2.03%
3
months
3.0%
2.9%
3.2%
2.6%
3.0%
2.5%
3.2%
6
months
-0.2%
0.1%
-0.9%
3.1%
1.9%
-0.3%
-1.3%
12
months
1.0%
1.5%
-0.4%
6.4%
4.6%
1.1%
-1.2%
STEFI Index
CILITR Index
TFJPREFZ Index
jpeiglbl Index
Cash
JSE Composite Inflation-linked Bonds Index
Preference Share Index
JPMorgan EMBI Global
0.62%
-0.55%
-0.27%
-0.30%
1.77%
3.4%
12.1%
5.00%
3.44%
2.7%
11.0%
5.30%
6.80%
7.0%
12.1%
4.55%
Year-todate
6.9%
6.6%
7.7%
4.6%
5.8%
6.5%
7.9%
2.88%
4.58%
12.1%
6.91%
Source: Deutsche Securities
Following comments from the US Fed, global market volatility picked up again in mid-May, tempering the rally in risk assets. On balance, global growth data remained positive,
but the Fed’s more hawkish tone realigned market expectations for further rate normalisation this year, which bolstered the dollar. In the US, employment data remained decent –
albeit with tentative signs of some moderation in employment growth, but earnings improved and retail sales in April were strong. GDP data published for the first quarter of 2016
are consistent with growth of about 2% in real terms this year, but there were more mixed data from the housing market: sales rose, but broader capex intentions were lower.
There were also some signs of greater price traction, with the PCE deflator rising modestly and CPI ticking higher as base effects become less favourable. The Federal Open
Market Committee statement was generally interpreted as being slightly hawkish, with ‘most participants’ judging that a June hike would be appropriate, although the balance of
risks were more equally distributed.
European data have been resillient. Eurozone domestic demand remains solid, supported by easy monetary policy, relatively low oil prices, some strength in labour markets and
an increase in fiscal outlays. GDP data published for the first quarter of 2016 surprised to the upside, and the region is expected to grow by 1.6% this year. The manufacturing
sector has held up well, and both the Eurozone PMI and German IFO data in April improved. The weak Japanese economy prompted an announcement of further stimulus, and
the pending VAT hike was delayed to October 2019. The UK’s Brexit outlook remains hard to call, with the ‘leave’ vote gaining ground after the public debate focused more
sharply on migration. The run-up to the UK Brexit referendum will continue to overshadow market and economic data until D-day on June 23.
In South Africa, activity data point to a GDP contraction in the first quarter of 2016, with both the mining and manufacturing sectors under pressure, and agriculture suffering the
ongoing effects of the drought. Mining production fell almost 20% compared to the fourth quarter of last year, mostly due to safety-related stoppages in the platinum group
metals sector. Agricultural production is also likely to have remained weak as the lingering effect of the national drought continues without relief. Crop estimates continue to
forecast a small maize harvest this year. There should be a small improvement in manufacturing output off a weak base, but not enough to be a significant contributor to growth.
Inflation also moderated in the March and April data, reflecting a temporary reprieve from oil-related base effects. Headline CPI was 6.2% y/y in April, from 6.3% y/y in March and
7% in February. However, the detail remains concerning: food inflation surged to 11.3% y/y in April, from 9.8% y/y in March, and there is some emerging eidence of a pass-though
from the weaker currency in vehicle and appliance prices. We continue to expect CPI to rise above 7.5% y/y by the fourth quarter this year, before moderating in 2017.
Despite this, the SARB’s MPC voted in a 5-1 split to pause and reassess the impact of the hikes implemented to date against the weak growth backdrop. The governor, however,
made it clear that the MPC is still in a rate normalisation cycle, and more tightening can be expected. Nonetheless, the MPC revised both its inflation and growth forecasts. A nearterm deterioration in inflation came as a result of a higher food inflation forecast. The SARB now sees inflation averaging at 6.7% (from 6.6%) for the year, peaking at 7.3% at the
end of the year. Forecasts for 2017 and 2018 were left unchanged. Growth forecasts were revised lower, with GDP projected at 0.6% in 2016 and 1.3% in 2017.
Statistics South Africa published retrospective revisions to both supply-side and demand-side GDP data from 2010 to 2015. This is part of the process of streamlining the GDP
statistics, and formally taking over the publication of demand-side data from the SARB. There were only minor changes to both the size and growth rates in the historic data, but
the distribution of growth within the data changed.
The extent and speed of policy and macroeconomic adjustments – both domestic and external – have provided the fund with numerous ongoing opportunities to implement a
wide array of small-scale and genuinely diverse relative value positions. Existing themes include the continued divergence between the bond and swap curves and lower inflation
in the medium term, while emerging themes include complacency around US policy normalisation and a possible inflection point for SA monetary policy. As always, implementing
appropriately sized relative value exposures across a range of opportunities to provide the most suitable return profile for our clients remains a key objective for this fund.
SOUTH AFRICA
Tel: +27 21 680 2000 | Fax: +27 21 680 2100 | [email protected]
www.coronation.com
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limitations as to the appropriateness of any information given. It is therefore recommended that any potential investor first obtain the appropriate legal, tax, investment or other professional advice and formulate an appropriate investment
strategy that would suit the risk profile of the potential investor prior to acting upon such information and to consider whether any recommendation is appropriate considering the potential investor’s own objectives and particular needs.
Neither Coronation Fund Managers Limited nor any subsidiary of Coronation Fund Managers Limited (collectively “Coronation”) is acting, purporting to act and nor is it authorised to act in any way as an advisor. Any opinions, statements or
information contained herein may change and are expressed in good faith. Coronation does not undertake to advise any person if such opinions, statements or information should change or become inaccurate. This document is for
information purposes only and does not constitute or form part of any offer to the public to issue or sell, or any solicitation of any offer to subscribe for or purchase an investment, nor shall it or the fact of its distribution form the basis of, or
be relied upon in connection with any contract for investment. Hedge Fund Investments are not regulated by the Financial Services Board (FSB). The value of the investments may go down as well as up and past performance is not
necessarily a guide to future performance. Investors may not receive back the full amount invested and may suffer capital loss. Investment in the fund may not be readily realisable. All income, capital gains and other tax liabilities that may
arise as a result of participating in this investment structure, remain that of the investor. Coronation Fund Managers Limited is a full member of the Association for Savings and Investment SA (ASISA). Coronation Asset Management (Pty) Ltd
(FSP 548) and Coronation Investment Management International (Pty) Ltd (FSP 45646) are authorised financial services providers.