Coronation Strategic Income Fund review 2022

Published by
Lethabo Ntsoane

The Coronation Strategic Income Fund invests primarily in assets that generate income and prioritizes income generation overgrowth. The fund is intended for people who want to invest in low-risk securities. Even though the fund primarily invests in income-producing assets, it surpasses pure income funds and traditional money markets in terms of returns.

However, unit trusts that invest in equities produce higher returns than the Coronation Strategic Income Fund. This fund offers consistency for the investor and is less volatile than similar funds. The fund offers modest returns while, to a certain extent, preserving investor capital. Therefore, this fund is suitable for those who are cautious and want to invest in a fund that mostly invests in income assets. 

To some extent, the fund adheres to its own strategic mission in order to achieve its goals. Currently, the fund has invested 75% of its portion in assets with an income. Growth assets are to be used to invest the final 25% of the fund. Investments may, however, exceed the established threshold if the mandate has been strictly fulfilled and the fund may still achieve its objectives.

Coronation advises that investments in the fund be made for a minimum of a year. Despite the fund’s tendency to fluctuate and cause financial losses, it is less volatile in the short term. However, if an investment is made for a period of 12 months or more, the fund will be able to generate exceptional interest. 

An investment in the fund is great for many types of investments. However, knowing which investments are supported by the fund is crucial. Continue reading as we explore these subjects below in more detail to learn precisely what investment vehicles to employ and how the fund operates.

Coronation strategic income fund summary

The Coronation strategic income fund is a unit trust that targets 110% of the SteFi 3-month index. Since the fund’s debut on July 2, 2001, it has been able to outperform its benchmark. The fund has been able to grow by 580.40 % as of 2022 since its establishment.

Since the benchmark experienced an average growth rate of 8% over time, the fund has outperformed it on average by 1.60 %, growing by 9.60% annually. Like any other investment, the fund has its ups and downs. The fund doesn’t hit double-digit lows, but it is more defensive.

Only 4.20 % is an all-time low for the Coronation Strategic Income Fund. This number qualifies the fund as a very low-risk investment. The fund, on the other hand, has a lifetime high of 60.50 % and an annual lifetime high of 18.70. The numbers are overwhelmingly moving in the right direction.

In order to reach these numbers, the fund allocates more money to income assets than to stocks. This reduces the short-term volatility of the fund. The following asset classes are where the fund has made investments:

Asset descriptionLocal asset holdingInternational asset holding
Cash and Money Market NCDs19.50%0.40%
Fixed Rate bonds 26.90%7.10%
Floating Rate bonds27.70%3.70%
Inflation linked bonds 13.50%0.10%
Listed property 3.90%0.90%
Preference shares 0.10%0%
Futures(4%)0%
Total assets 87.70%12.30%

It is evident from the allocation of assets held that the fund invests more in bonds than any other asset class. The fund invests in corporate and government bonds, which have low capital risk but offer less growth than investments in stocks.

We have created a list of the top 5 allocations below to give you an idea of the companies and businesses that the fund invests in. 

The top 5 asset allocations by the Coronation strategic income fund

#Issuer of bondsFund percentage
1The Government of RSA Bonds22.1%
2Nedbank Ltd 10.8%
3Absa Ltd 10.6%
4Standard Bank of South Africa Ltd 10%
5FirstRand limited 9.3%

How the Coronation strategic income fund works

The Coronation Strategic Income Fund is appropriate for investors who want to make medium-to-long-term commitments. With an additional growth percentage to boost invested money, the fund can offer investment returns that outperform the rate of inflation. Because the fund complies with Regulation 28, pension investments are permitted.

Endowments, preservation funds, and other retirement investments can be added to the account. There are no restrictions on other common investments, so you can use the account for them. Tax-free savings must, however, stay under the SARS-established limits.

The fund can be applied for on the Coronation website. A minimum contribution threshold must be met in order to invest in the Coronation strategic income fund. There are two methods for contributing to the fund. A minimum contribution of R500.00 can be made each month by debit order. As an alternative, a lump sum payment may be made, which necessitates a minimum R5,000.00 deposit into the fund.

Additionally, there are costs associated with managing, using, and operating the fund. The fund charges a 0.75 % annual management fee. Transaction costs and expense fees are additional costs. These fees rise yearly.

Advantages of the Coronation strategic income fund

  • The fund has a low level of risk for capital losses as it has so far only recorded an all-time low of 4.2%.
  • Contributions to the account are very low.
  • There are two ways that can be used to make contributions to the account.
  • The fund is Regulation 28 compliant and retirement investments can be made using the account.
  • Fees attached to the product are very low and justifiable considering the performance of the fund.
  • The fund manages to outperform its benchmark more regularly.

Disadvantages of the Coronation strategic income fund

  • Those that want a unit trust that is dominated by equity investments cannot be accommodated.
  • The growth of the fund is moderate and mainly focuses on medium-to-long-term growth.

Conclusion

Since its inception, the Coronation strategic income fund has beaten its established benchmark, even during severe recessions. Even during the 2008 financial crisis, the fund was able to perform better due to its ability to withstand market turbulence. An investment in the fund clearly offers capital protection, and small returns on investment, and outperforms the inflation rate in South Africa.

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Lethabo Ntsoane

Lethabo Ntsoane holds a Bachelors Degree in Accounting from the University of South Africa. He is a Financial Product commentator at Rateweb. He is an expect financial product analyst with years of experience in reviewing products and offering commentary. Lethabo majors in financial news, reviews and financial tips. He can be contacted at lethabo@rateweb.co.za

Published by
Lethabo Ntsoane
Tags: Coronation
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