Coronation Resources Fund is one of the few funds in South Africa that plays a key role in investing in the resources sector. The sector can include companies involved in mining, minerals, energy, natural resources, and other commodities. These companies must be listed on the Johannesburg Stock Exchange for the fund to invest in them.
As it is far more concentrated than a fund that invests in a variety of assets, this fund might not be suitable for any type of investor. The fund fluctuates more than a fund that invests in bonds, various shares, and money market instruments as a result of the fund’s concentration.
Over time, the fund is able to deliver positive returns because of the strategies used by the fund managers. It has managers that are well vested in the resources industry.
Coronation advises investors to retain their investment in the fund for at least five years due to the fund’s volatility. The fund discourages short-term investments since they tend to be more volatile. The risk profile for the fund is graded as 10/10 and the fund is deemed as an aggressive fund by Coronation.
The fund is a single industry-focused fund since it invests almost exclusively in resource firms. The fund will probably decrease the percentage of its investments in an industry if it experiences a shakedown and increases if the industry performs well. Due to this, the fund fluctuates over the short term but is significantly more stable over the long term.
Investment in the fund provides high returns for investors, and historical data proves this. To understand the fund, continue reading as we provide a detailed analysis of the fund below.
Coronation Resources Fund summary
The Coronation Resources Fund is a unit trust that aims to maximize long-term growth by investing in a select group of resource companies. The fund invests in industries that are involved in mining, minerals, energy, natural resources, and other commodities.
The Coronation Resources Fund has set the FTSE/JSE Resources Index as its benchmark. The fund was launched on October 1, 1999. Since its formation, the fund has recorded a cumulative growth of 5474.8% and annual average growth of 19.4%.
The fund’s benchmark has during the same period recorded growth of 1814.8% and an annual average increase of 13.9%. From the historical data, the fund has managed to outperform the fund by a growth percentage of 3660% and an annual average of 5.5%.
To achieve the results, the fund has had highly volatile years due to the industry it invests in. It has recorded an annual low of 54.2%, which was achieved from March 2008 to February 2009.
Its highs are also impressive. The fund has managed to record highs of 157.7%, with the feat recorded between April 2020 and March 2021. The fund clearly records more highs than lows as the fund has been able to generate favourable returns.
The fund’s performance is attributable to the investments that it makes. As of 2022, the fund has invested in the following:
- Basic materials, which account for 90.70% of the fund’s portfolio,
- Industries which account for 3.3% of the fund’s portfolio,
- Energy investments which account for 4.9% of the fund’s portfolio,
- Cash which accounts for 0.9% of the fund’s portfolio, and
- Other investments account for 0.2% of the fund’s portfolio.
Investments in the Fund are rebalanced from time to time. Therefore, investments may vary but will be kept within the constraints of the fund’s mandate.
The Coronation Resources fund invests in JSE-listed companies that engage in the business of resources. We have shortlisted the top 10 holdings that the fund holds on the JSE. The top 10 companies that the fund invests in are as follows.
Top 10 holdings of the Coronation Resources fund
|2||Glencore xstrata Plc||9.9%|
|3||Northam Platinum Ltd||9.8%|
|4||Exxaro Resources Ltd||7.2%|
|5||Pan African Resources Ltd||7.1%|
|6||Textainer Group Holdings Ltd||6.8%|
|8||AngoGold Ashanti limited||6. 4%|
|10||Thungela Resources Ltd||5.1%|
How the Coronation Resources Fund works
An investment in the Coronation resources fund requires one to choose an investment vehicle. One will have to choose from a wide range of investment vehicles that are offered by Coronation. The Coronation resources fund is not Regulation 28 compliant.
Retirement investments cannot invest in the fund since it doesn’t meet the portfolio compilation threshold set in Regulation 28 of the Pension Funds Act 24 of 1956. Investments that are allowed can be for savings, investments towards a particular goal, and more.
A minimum investment of R5000.00 or R500.00 per month or more will have to be made when investing in the fund. The investment will be used to purchase units in the fund. The number of units issued will depend on the price per unit at the time of investment and the amount invested.
An annual management fee is levied by the fund. As of 2022, the fund charges 1% of the annual management fee. Other costs, such as transaction costs and fund expenses, will also be deducted.
Advantages of the Coronation resources fund
- The fund invests in a specialised industry in it fully appreciates and understands.
- The fund is able to outperform its benchmark. It has done so year to year since its inception.
- Minimum contributions are low or moderate.
- Long-term investors can get returns that are above the inflation rate or more.
- Fund managers hold the necessary qualifications to run the fund.
- The fees that are charged are moderate considering the returns that the fund provides.
Disadvantages of the Coronation resources fund
- The fund is not Regulation 28 compliant. Hence, retirement investments cannot be invested in the fund.
- Short-term investors risk a capital loss.
The Coronation Resources Fund is a specialised fund for those that want to invest in a fund that invests only in listed companies that are in the resources sector. The fund is best suited for an investor that wants to blend his/her investment portfolio by adding a fund that only invests in companies that deal with resources. Investors interested in short-term investments can invest in the Coronation Jibar Plus Fund.