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Coronation Smaller Companies fund reviews 2022

Coronation Smaller Companies fund

The Coronation Smaller Companies fund is one to choose if you want to invest in companies that have great potential for growth, as small-to-medium businesses are the backbone of the South African economy. A select set of small-to-mid-sized JSE-listed businesses are the targets of the fund’s investments.

The combined JSE mid and small-cap indices were chosen by the fund as its benchmark. Sadly, the fund hasn’t been able to surpass the chosen benchmark, but it still generates returns that are above average. The fund has, on average, outperformed the composite indices since its inception by 1.3%.

Despite not outperforming the benchmark, the fund nevertheless performs well. Each year, the fund has increased by 12.2%. This amount is 4.3% more than the inflation rate in South Africa overall. The benchmark, on the other hand, increased by an average of 14% annually over that time.

The fund is volatile and has been rated aggressively with a 10/10 risk profile as per the Coronation rating. The fund’s volatility can be seen from the performance it produces. Since its inception, the fund has once hit the highest drawdown of 50.2%.

For short-term investors, a decrease of this magnitude that turns negative can be a nightmare. High returns have been achieved by the fund as well. The fund has seen a gain of as much as 67.2 %. Such volatility can have a significant impact on a short-term investment because it puts the invested funds in danger.

You will discover why the fund is appropriate for long-term investors as you read on, and you will also comprehend how the fund functions. Continue reading to learn more about the fund if you intend to make an investment in it.

The Coronation Smaller companies fund is explained further below. 

Coronation Smaller Companies fund summary

The Coronation Smaller Companies fund is a unit trust that was first launched on April 1, 1999. The fund has set the JSE mid and small cap indices as its benchmarks, excluding real estate. To achieve its objectives, the fund employs well-vested managers. However, as of 2022, the fund will only be managed by Alistair Lea. 

The Coronation Smaller Companies fund invests in companies that form part of the JSE small or mid-cap indices. These companies are not the safest, as large-cap companies provide a safer investment because of their stability. As such, this makes the fund more volatile than a fund that invests in companies in the JSE large-cap index. 

The fund requires investors to meet the minimum deposit threshold set by the fund. There are two ways of making contributions to the fund. One way to make a contribution is through a monthly debit order of not less than R500.00. The second way to make contributions is through a lump sum contribution of not less than R5,000.00. 

The fund’s units can be purchased for R102.32 per unit as of June 2022. The unit price fluctuates from time to time depending on the fund’s performance. As of 2022, the Coronation Smaller Companies fund has been valued at R395.08 million. 

Since the fund’s inception, it has been able to grow by 1726.5%. During the same period, the benchmark had a growth of 2618.5%. As a result, the benchmark managed to outperform the fund by 891.8%. This doesn’t mean that the fund underperformed since it earned an average increase of 12.2% during the same period. 

To achieve its goals, the fund invests in a number of assets. The assets that the Coronation Smaller companies fund invests in are listed below. 

Coronation Smaller Companies fund assets composition

ASSETPORTFOLIO PERCENTAGE 
Equities:
Basic materials 6.9%
Industries 12.6%
Customer goods11.5%
Health care2.5%
Customer service 21.9%
Telecommunications2.9%
Energy2.3%
Financials29.5%
Technology 3.9%
Derivatives 1%
Preference shares and other securities3.7%
Real Estate (domestic) 0.8%
Domestic cash0.5%

The Coronation Smaller companies fund invests most of its investments in financials, which make up 29.5% of the fund. The fund also concentrates most of its investments in customer service companies, industries and customers. This shows that the fund invests in companies that operate in any sector of the economy. 

Now that we know the assets that the fund holds, we have further compiled the companies that the fund invests in. We only listed the top 10 companies that the fund invests in. The list of top 10 companies is listed below. 

Top 10 holdings of the Coronation Smaller Companies fund 

#Company Name Fund percentage 
1Rand Merchant Investments Holdings 6%
2SPAR Group Ltd 5.8%
3Invicta Holdings Ltd 4.2%
4Hosken Consolidated Investments 4.2%
5Reinet Investment SCA3.9%
6PSG group3.8%
7Metair Investments Ltd 3.7%
8Aspen Pharmacare Holdings Ltd 3.2%
9Sanlam life assurance limited 3.1%
10Dischem Pharmacies Ltd 3%

The fund rebalances its holdings in companies from time to time. The composition of investments in the companies is from data extracted in June 2022. As such, the holdings will change as time progresses. 

Advantages of the Coronation Smaller companies fund 

  • The fund invests in a diverse range of assets. 
  • The fund is well managed as it provides returns that are well above the South African average inflation rate. 
  • Long-term investments in the fund tend to benefit more from an investment in the fund. 
  • The fund only invests in companies that are listed on the JSE small or mid-cap indices. 
  • There are two ways to make contributions to the fund. 
  • The fund invests in well-known small to medium listed companies to balance the level of risk it takes. 

Disadvantages of the Coronation Smaller companies fund

  • Short-term investments tend to risk capital gains as capital may decrease at a rapid rate. 
  • The fund is not Regulation 28 compliant. Retirement investments cannot be made using the fund. 
  • Capital is not protected when investing in the fund. 

Conclusion 

The Coronation Smaller companies fund is suitable for those that want to invest in a fund that provides above-average returns while looking at investing in the long run. The fund doesn’t invest in large-cap stocks, therefore, as an investor, you have to be willing to accept the risk that comes with such an investment. An investment in the fund is highly volatile in the short run but tends to be regulated over the long run. 

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