Coronation Top 20 fund review 2022

The Coronation Top 20 fund is a unit trust that was founded on October 02, 2000. The fund invests in a number of South African companies listed on the JSE (Johannesburg Securities Exchange). A Coronation Top 20 fund is only allowed to invest in the top 50 domestic shares as measured by their market capitalisation. 

The Coronation Top 20 is one of the best performing unit trusts in South Africa and has each year proven that it can yield positive results. The fund is suitable for those that don’t mind short-term losses and have long-term earnings in mind. This is because the fund may register losses in the short run and profits in the long run. 

Evidence of the aforementioned statement is seen in the performance of the fund itself. The fund has managed to outperform its set benchmark since the fund’s inception. Since its inception, the fund has recorded an average return of 17.10% as compared to the benchmark’s performance of 13.70%. This is an average difference of 3.4%.

Looking at the numbers, the fund has performed exceedingly well. For example, an investment of R100,000 at the fund’s inception would result in R2.83 million, compared to R1.52 million for the benchmark. This means that the investment would have grown by R2.73 million over a 22-year period.

An investment in the fund truly works for the long-term investor. For a short-term or speculative investor, the fund may not be a good option. The fund can record lows of over 30% decrease over a short period, which can be a nightmare for someone looking to make regular withdrawals from the fund. 

To better understand the fund before making an investment, continue reading as we give you a critical overview of the fund and also explain how the fund works. The fund is analysed in greater detail below. 

Coronation Top 20 fund summary

The Coronation Top 20 fund is a unit trust that is administered by Coronation Fund Managers. The unit trust is currently valued at R24.48 billion, making the fund one of the biggest in South Africa. Each unit trades at R177.28 and is listed on the JSE as CNTF.

The fund focuses on equity investments, which account for 99.8% of the fund, with cash investments accounting for the remaining 0.2% of the fund. The Coronation Top 20 fund invests in the top 50 domestic shares as per their market capitalisation. As of 2022, the fund has invested as follows:

Since the fund invests 99.8% of the capital in equities, it is not Regulation 28 compliant. Therefore, retirement investments cannot be made using the investment vehicle. Regulation 28 of the Pension Funds Act 24 of 1956 states that equities investments ( local and foreign) must be limited to 75% of the portfolio. 

Other investment vehicles that are non-contingent to Regulation 28 of the Pension Funds Act can invest in the fund. These include but are not limited to tax-free savings, fixed-period savings, and ordinary investments. 

How the Coronation Top 20 fund works

The Coronation Top 20 fund targets individuals that want to invest for a longer period. The fund invests in equities in South Africa and follows the FTSE/JSE All Share Index as its benchmark. Since it invests in equities, the fund is Regulation 28 non-compliant. Therefore, retirement funds cannot be invested in the fund. 

So, to get started with the Coronation Top 20 fund, an application will have to be made. An application can be made online on the Coronation website or by filling out an application form. An investment vehicle will have to be chosen to make an investment in the fund. One can choose from investment opportunities with tax benefits and more from Coronation. 

Beneficiaries of the plan will have to be nominated should the investor die. Beneficiaries can include family members or anyone that you want to nominate. A contribution method will also have to be selected. The fund has 2 ways of making contributions: a monthly contribution option and a lump sum contribution option. 

Contribution methods available have minimum limits attached to them. The monthly debit order contribution has a minimum contribution threshold of R500.00 and the lump sum contribution has a minimum contribution threshold of R5,000.00. Both methods can be used to make contributions to the fund. 

There are costs that are associated with the fund, and one main cost that cannot be avoided is the annual management fee. The annual management fee has a minimum cost of 0.50% and a maximum cost of 3%. Other costs include the total expense ratio and transaction costs. These costs may vary from year to year. 

Advantages of the Coronation Top 20 fund

• The fund provides good returns on investment over a long period.
• There are 2 contribution methods available for investors.
• Investors don’t need to manage the investment in the fund themselves as managers are there to invest on behalf of clients.
• The fund only invests in top stocks on the JSE, which makes it one of the most reliable funds there is.
• The product can be purchased remotely.
• There is a proven track record of 22 years showcasing how well the fund performs.

Disadvantages of the Coronation Top 20 fund

• Investment in the fund is volatile over a short investment period and may not favour speculative investors.
• Capital invested in the fund is not guaranteed.
• The fund is not Regulation 28 compliant. Therefore, pension investments cannot be made in the fund.

Conclusion

The Coronation Top 20 fund is suitable for long-term investors and poses a high risk for short-term investors due to the fund’s volatility. Over a longer period of investment, great performance is nearly guaranteed as the fund tends to overturn losses over the long term.