For those that want to preserve their money, the Coronation money market fund is a fund that seeks to preserve the value of investors’ funds. The fund’s primary goal is capital preservation rather than capital growth. Therefore, if you want capital growth, you should look at other funds offered by the financial service provider.
The mandate of the fund specifies that it should invest primarily in income-producing assets. In actuality, income asset accounts are intended to represent the entire fund. To benefit from the market, the fund may periodically invest in growth assets. As of 2022, the fund has managed to reach its mandate by managing to invest 100% of the fund in income assets.
The fund features modest fees and is thought to be a low-risk investment. The fund must invest in low-risk assets in order to be recognized as a low-risk investment. As a result, the fund received a risk rating of 1 out of 10 from Coronation. The Alexander Forbes 3-month index comes second to the fund.
Since its debut, the Coronation Money Market Fund has been able to outperform the benchmark. In addition, the fund has consistently performed at or above the benchmark. However, there is not much of a performance gap between the benchmark and the Coronation Money Market Fund.
As we further delve into the details of the fund, we present a critical analysis of the benchmark to help you understand the fund better. We encourage you to read our discussion below for more information on the Coronation Money Market Fund before making an investment.
Coronation Money Market Fund summary
The Coronation Money Market Fund, which debuted on October 1, 1999, is now worth R4.51 billion. The fund has a unit price of R10.00. The Coronation Money Market Fund seeks to outperform call and one-to-three-year fixed deposit accounts over the long term by investing all of its money in income-producing assets.
Bank deposits can be substituted with investments in the fund. Since its inception, the fund has been able to outperform its benchmark. However, the fund merely seeks to maintain invested capital while producing little capital gain. And they unlinked bank fixed deposits from the fund, which provides capital guarantees.
The fund has grown by 451.90 % since its inception, while the benchmark it tracks has grown by 421.40 %. As a result, the fund has been able to outperform the fund since its genesis by 30.50 %. Compared to the benchmark’s growth of 7.6 %, the fund has typically seen yearly rises of 7.8%.
The fund made investments in a variety of income-producing assets to accomplish this. Additionally, the fund advises clients to make investments for a minimum of one month or longer in order to receive favorable returns. Returns are determined by the fund’s performance.
The fund’s portfolio includes holdings in some of South Africa’s most well-known corporations. Here is a general overview of the fund’s portfolio structure.
Coronation money market fund portfolio composition 2022
| # | Companies | Portfolio share |
| 1 | Absa Bank Ltd | 21.6% |
| 2 | Standard Bank of South Africa Ltd | 20.9% |
| 3 | Nedbank Ltd | 18.7: |
| 4 | South African Reserve Bank | 12.7% |
| 5 | FirstRand Bank Ltd | 5.5% |
| 6 | FirstRand limited | 5.4% |
| 7 | Pick n Pay stores | 5.2% |
| 8 | Standard Bank Group Ltd | 2.5% |
| 9 | Others | 7.5% |
| Total | 100% |
How the Coronation Money Market Fund works
The Coronation Money Market Fund invests all of its money in financial securities with short-term maturities, typically less than a year. These encompass a variety of securities issued by banks and other organizations. The main banks in South Africa dominate the fund’s money market instruments, with the Reserve Bank also receiving a sizable portion of the fund’s investment.
An investment vehicle must be used in conjunction with a fund investment. Coronation offers a variety of investment vehicles, including tax-free savings accounts and regular investment accounts. Other investment vehicles may not make investments in the fund.
The Pension Funds Act 24 of 1956’s regulation 28 isn’t followed by the fund. Due to the fund’s capital exposure, retirement investments cannot invest in it. Despite not being able to fulfill the fund’s standards, it is still a worthwhile investment for people with short-to long-term investing objectives.
One can apply for the fund through the Coronation website. There is only one way to contribute to the fund in order to make an investment. A contribution can only be made in one lump sum. The fund can accept lump-sum contributions starting at R10,000.00. Investors are advised by the fund to hold their investments for at least one month or longer.
Investors do not need to supervise their investments because the fund is managed by seasoned investment managers. The investment managers will need to be paid for their work. The investment has an annual management fee of 0.25% (VAT excluding). There are no fees for transactions. The total cost of other investing fees is 0.30 %.
Advantages of the Coronation Money Market Fund
- The fund is very stable and is suitable for short-term capital protection.
- Capital invested is protected to a certain extent and is able to earn interest.
- The fund is able to outperform the benchmark and has done so since its inception each year.
- The fund averages high returns that are above the South African inflation rate.
- Only secure investments are made that provide a fixed income.
Disadvantages of the Coronation Money Market Fund
- Long-term investments won’t be able to generate as much return as unit trusts that invest in shares.
- The fund does not adhere to Regulation 28.
- Short-term capital may slightly decline.
Conclusion
For those who need quick access to cash while investing in short-term securities, the Coronation Money Market Fund is a wise choice. Despite the fund’s lack of a capital growth objective, the invested capital can increase at a pace that is substantially higher than average for a money market fund.
