The document discusses sustainable income in retirement. It provides the following key points:
1) Most retirees in South Africa rely on living annuities for retirement income, with the average investment size being R560,000 and average income rate of 7%. Over 50% of annuitants under 70 draw an income above 7.5%.
2) There are potentially far-reaching policy proposals to reform the post-retirement income market to make it more sustainable. Key proposals include increased automation, increased longevity protection for retirees, and reforming living annuities.
3) The proposals aim to introduce a default retirement income product, auto-enroll retirees into it, limit investment choices to reduce fees
In this write-up, I discuss an engineering (methodical) approach to personal finance. I introduce the concept as growing wealthy using an engineering approach. I then describe the parts of the approach in some detail. A full presentation that follows this approach can be found below.
In every movie, at the end everything goes well and movie ends happily and if it didn’t, then... "Picture abhi baaki hai mere dost"
How happy we’ll be if our life turns out to be like a movie, no? But the truth is … Life is not a movie. We all know about the hardship and struggle of life. But YES, if we plan our finances and manage it properly then we can surly make the story of our life “Happy".
So where ever you are and in whatever condition, let's start planning our finance because."Picture abhi baaki hai mere dost...". We at financial Hospital is coming with a session on how to plan and where to find safe heaven for your finance. Read on to make yourself a super hero of your own life movie.
In this write-up, I discuss an engineering (methodical) approach to personal finance. I introduce the concept as growing wealthy using an engineering approach. I then describe the parts of the approach in some detail. A full presentation that follows this approach can be found below.
In every movie, at the end everything goes well and movie ends happily and if it didn’t, then... "Picture abhi baaki hai mere dost"
How happy we’ll be if our life turns out to be like a movie, no? But the truth is … Life is not a movie. We all know about the hardship and struggle of life. But YES, if we plan our finances and manage it properly then we can surly make the story of our life “Happy".
So where ever you are and in whatever condition, let's start planning our finance because."Picture abhi baaki hai mere dost...". We at financial Hospital is coming with a session on how to plan and where to find safe heaven for your finance. Read on to make yourself a super hero of your own life movie.
SBI Magnum Multicap Fund: An Open-ended Growth Scheme - May 17SBI Mutual Fund
SBI Magnum Multicap Fund provides investors with opportunities for long-term growth in capital along with the liquidity of an open-ended scheme through an active management of investments in a diversified basket of equity stocks spanning the entire market capitalization spectrum and in debt and money market instruments. To learn more about this mutual fund check SBI Mutual Fund page
https://www.sbimf.com/en-us/equity-schemes/sbi-magnum-multicap-fund
SBI Magnum Equity Fund: An Open-ended Equity Scheme - May 17SBI Mutual Fund
SBI Magnum Equity Fund is an equity scheme that seeks capital appreciation through investment in diversified portfolio of equities of high growth companies, along with liquidity of an open ended scheme. To know more about this mutual fund check the SBI Mutual Fund Page
https://www.sbimf.com/en-us/equity-schemes/sbi-magnum-equity-fund
For the first quarter of 2011, the markets brought some fancy footwork. In late January, the Middle East erupted in protest and violence, oil was surely going back to $200 a barrel, and consumer spending would subsequently slow.
Asit C Mehta Investment Interrmediates brings to you the reasons to save your money. Save for a better & secure future. “Getting Rich is not a function of investing a lot of money; it is a result of investing regularly for long periods of time.”
SBI Magnum Equity Fund: An Equity Mutual Fund - Jul 2016SBI Mutual Fund
SBI Magnum Equity Fund is an open ended Equity Mutual which is best suited for investors seeking long term investment. This Mutual Fund Scheme seeks to provide maximum growth opportunities from a portfolio of equity and debt instruments of companies having high growth potential. To know more about this product check our website page https://www.sbimf.com/Products/EquitySchemes/Magnum_Equity_Fund.aspx
Systematic investment plans have turned out to be one of the major attractions in mutual funds for the investors. Go through this PPT to learn more about SIP & Benefits of SIPs. For more information visit - http://www.dspblackrock.com/resources/tools-and-calculators/sip-calculator.aspx.
Growing Money: Choosing Investments and Various StrategiesRavi Shikha
What we discuss :
How to allocate money in these 4 Assets Class : Domestic Equity, Global Equity, Gold and Debt
Mutual Fund Scheme Selection using Risk Reward Ratios, Rolling Returns etc.
Optimization of Portfolio based on HRP (Hierarchical Risk Parity) Model
Monitoring and Rebalancing of Portfolio
Financial Planning - Plan Today For Better Tomorrowmanish73
This presentation is based on Financial Planning for an individual that how an individual can plan their finances well in advance or to start with a small saving habits for their better future.
SBI Magnum Balanced Fund: Balance Between Growth And Stability - Apr 2016SBI Mutual Fund
"SBI Magnum Balanced Fund invests in a mix of equity and debt investments. This Hybrid scheme provides a good investment opportunity to investors who do not wish to be completely exposed to equity markets, but are looking for relatively higher returns than those provided by debt funds.
For more information about this hybrid scheme check our website page https://www.sbimf.com/Products/HybridSchemes/Magnum_Balanced_Fund.aspx
SBI Magnum Multicap Fund: An Open-ended Growth Scheme - May 17SBI Mutual Fund
SBI Magnum Multicap Fund provides investors with opportunities for long-term growth in capital along with the liquidity of an open-ended scheme through an active management of investments in a diversified basket of equity stocks spanning the entire market capitalization spectrum and in debt and money market instruments. To learn more about this mutual fund check SBI Mutual Fund page
https://www.sbimf.com/en-us/equity-schemes/sbi-magnum-multicap-fund
SBI Magnum Equity Fund: An Open-ended Equity Scheme - May 17SBI Mutual Fund
SBI Magnum Equity Fund is an equity scheme that seeks capital appreciation through investment in diversified portfolio of equities of high growth companies, along with liquidity of an open ended scheme. To know more about this mutual fund check the SBI Mutual Fund Page
https://www.sbimf.com/en-us/equity-schemes/sbi-magnum-equity-fund
For the first quarter of 2011, the markets brought some fancy footwork. In late January, the Middle East erupted in protest and violence, oil was surely going back to $200 a barrel, and consumer spending would subsequently slow.
Asit C Mehta Investment Interrmediates brings to you the reasons to save your money. Save for a better & secure future. “Getting Rich is not a function of investing a lot of money; it is a result of investing regularly for long periods of time.”
SBI Magnum Equity Fund: An Equity Mutual Fund - Jul 2016SBI Mutual Fund
SBI Magnum Equity Fund is an open ended Equity Mutual which is best suited for investors seeking long term investment. This Mutual Fund Scheme seeks to provide maximum growth opportunities from a portfolio of equity and debt instruments of companies having high growth potential. To know more about this product check our website page https://www.sbimf.com/Products/EquitySchemes/Magnum_Equity_Fund.aspx
Systematic investment plans have turned out to be one of the major attractions in mutual funds for the investors. Go through this PPT to learn more about SIP & Benefits of SIPs. For more information visit - http://www.dspblackrock.com/resources/tools-and-calculators/sip-calculator.aspx.
Growing Money: Choosing Investments and Various StrategiesRavi Shikha
What we discuss :
How to allocate money in these 4 Assets Class : Domestic Equity, Global Equity, Gold and Debt
Mutual Fund Scheme Selection using Risk Reward Ratios, Rolling Returns etc.
Optimization of Portfolio based on HRP (Hierarchical Risk Parity) Model
Monitoring and Rebalancing of Portfolio
Financial Planning - Plan Today For Better Tomorrowmanish73
This presentation is based on Financial Planning for an individual that how an individual can plan their finances well in advance or to start with a small saving habits for their better future.
SBI Magnum Balanced Fund: Balance Between Growth And Stability - Apr 2016SBI Mutual Fund
"SBI Magnum Balanced Fund invests in a mix of equity and debt investments. This Hybrid scheme provides a good investment opportunity to investors who do not wish to be completely exposed to equity markets, but are looking for relatively higher returns than those provided by debt funds.
For more information about this hybrid scheme check our website page https://www.sbimf.com/Products/HybridSchemes/Magnum_Balanced_Fund.aspx
Tips on Investing for additional income from every sector of your Self Managed Superannuation Fund portfolio. We cover cash, high interest accounts, term deposits, Bonds and Hybrids, Direct Shares, Equity for Income Funds, ETFs both High Yield and Bonds, Commercial Property and International shares. Showing you how to make the most of your SMSF while managing the risk. This is part one of a 2 part series with the second part “Investing for Growth” to follow. Check out our blog at Http://smsfcoach.wordpress.com or follow us on twitter at @SMSFCoach and @NextGenWealth
How do Endowments Measure Up Against Cheap Market PortfoliosNeal Dikeman
Detailed analysis of portfolio returns and underperformance of Median US Endowments and Yale Endowment
Over 10 Years US Endowment Returns Fail to match Cheap Market Portfolios while Taking Significant Increased Risk
4.8% Compound Annual Returns for the Median US Endowment even failed to beat a portfolio of 10 Year Treasuries, let alone a balanced portfolio, while taking on significant risk
Underperformed cheap market portfolio by a 1/3rd with 3/5th more Risk
Returns barely exceeded average nominal withdrawal rates – asset growth largely from new donations
Asset Allocations/Market Timing largely to blame
[ARCHIVE] Aviva Real Retirement Report Summer 2012Aviva plc
The focus for the Summer 2012 Real Retirement Report is the transition between employment and retirement. What role do employers play? What role do employees want them to play? What type of help is expected?
Similar to Coronation p kempen - november 2012 (20)
2. State of the retirement income market
278,000 living annuities Average size: R560,000 Average income rate: 7%
>50%
90% …of living annuitants under
70 draw an income above
…of the R27bn invested in
compulsory annuities in
2011 were invested in living
annuities
7.5%
Source: ASISA Living Annuity Statistics for calendar year 2011.
7. Increased automation in the retirement process
Retirement funds must select a single default retirement income product
Retirees will be auto-enrolled into the default option
May opt out of default option, subject to taking advice
When opting out, they must choose a conventional life annuity or another
product that meets certain criteria
9. Increased longevity protection for most retirees
First R1.5m of capital available to purchase a retirement income to be
invested in an income plan that provides some form of longevity protection
Simplicity the word – very little choice, transparency, only initial
commission and only on initiation and first two switches
Suggested designs include conventional annuities, variable annuities and
a default version of a RIT
When opting out, they must choose a conventional life annuity or another
product that meets certain criteria
12. Reforming living annuities
Introduction of retirement income trust (RIT)
Modelled on CIS – transparent and well understood
Same tax treatment as living annuities
No investment choice to reduce fees, but may choose different underlying
investment strategies
Age-dependent drawdown limits
Limited commission to intermediaries
Will be able to transfer from a RIT to a conventional annuity free of charge
Reform existing living annuities to make them consistent with RIT
14. Retirees’ risks
Inflation risk
• Balance spending needs between 1st and 2nd halves of retirement
• Have enough exposure to growth assets
• Capital Plus has 60% risk budget specifically to assist with long horizon income
drawdown programmes
Sequence-of-returns risk
• Manage downside risks (Goldilocks approach to risk exposure required)
• Select more conservative drawdown rates when assets are expensive / outlook poor
• Adjust income drawdown in line with actual returns (spending rule approach)
Longevity risk
• Most clients underestimate their life expectancy
• If you can afford advice, you are likely to live longer than average
• Hence the need for a 30-40 year planning horizon when retiring at 60-65
• You can only insure against this risk by buying a life annuity at the moment (but poorly
priced because of low rates environment)
15. Income sustainability: 7.5% initial drawdown rate
If you earn a net real … you can maintain
return of… purchasing power for
2% 9 years
3% 11 years
4% 12 years
5% 15 years
6% 20 years
7% 23 years
Source: Asisa Standard on Living Annuities. Assumes constant inflation-adjusted
withdrawals.
16. Income sustainability: 5% initial drawdown rate
If you earn a net real … you can maintain
return of… purchasing power for
2% 19 years
3% 24 years
4% 34 years
5% 40+ years
6% 40+ years
7% 40+ years
Source: Asisa Standard on Living Annuities. Assumes constant inflation-adjusted
withdrawals.
17. More lessons from the literature / history
SAFEMAX
• Highest sustainable withdrawal rate if you retired in the year when a 50:50 equity: bond
portfolio offered the worst 30 year future return
• In SA this was 1930, when your sustainable withdrawal rate was 3.86% (assuming zero
fees!)
It’s all about the first ten years
• 80% of variation in safe drawdown rates is explained by interplay between investment
return, drawdowns and inflation over the first decade of retirement
Individual circumstances matter
• Significant opportunity for advice to add value…
18. Meeting higher spending needs
Shorter than average life expectancy
Using spending rules
• Formally matching drawdown rate to return and inflation experience during the first ten
years of retirement adds another 1%…
• Downside: potentially more income variability than some clients can stomach
Assuming declining spending as client ages
• US study shows 65-74 cohort spends 20% less & 75-84 cohort 40% less than 55-64
year olds. If entirely voluntary (debatable), this justifies a 1%-2% increase in initial
drawdown rate
• Only works if adequate provision made for late-life medical expenses
The difference three years make
• If you delay retirement by 3 years, you can increase the sustainable drawdown rate by
around 20% without making further contributions
19. Coronation Balanced Defensive
Cautious investors requiring stable returns
Investment
Risk Profile
Exposure to
Objective Conservative Moderate Aggressive Growth Assets
2/10 3 Years →
3/10 4/10 6/10 8/10
12.3%
Average exposure to growth assets through the cycle (5 years)
Coro
Top
100%
The exposure will fluctuate as valuations change
20
17.2%
Long-term Growth 9.3%
Coro Avg 70%
Return (Annualised Return)
Balanced Max 85%
Plus Reg 28
10.5%
9.3% Coro • Aim to outperform CPI + 4% over Avg 50%
Capital medium term Max 60%
Income & Growth Plus • Protect Capital over 12 months Reg 28
(Multi-asset) 6.7%
10.9%
Coro Avg 35%
• Aim to exceed cash + 3% over time
Balanced Max 40%
Defensive • Protected capital over 12 months 100% of the time Reg 28
9.9% 4.1%
Coro Avg 15%
Immediate Income Strategic Max 25%
Income (0% normal
2.1%
shares)
Reg 28
Risk (Annualised Standard Deviation)
5 Year Performance & Risk quoted from Morningstar as at 30 September 2012 for a lump sum
investment with income distributions reinvested. Growth Assets are defined as domestic/foreign
equities, listed property & commodities ex gold.
19
21. Coronation Balanced Defensive Fund
Performance since launch
Value of a R100,000 investment on 1 February 2007
R 185.000
R 180.000
R176 373
R 175.000
R 170.000
R 165.000
Coro Balanced Defensive
R 160.000
Mean Prudential Low Equity R153 289
R 155.000
R 150.000 STEFI R151 525
R 145.000
R 140.000
R 135.000
R 130.000
R 125.000
R 120.000
R 115.000
R 110.000
R 105.000
R 100.000
Mar-07
Mar-08
Mar-11
Mar-12
Mar-09
Mar-10
Apr-09
Apr-07
May-07
Apr-08
Dec-09
Apr-10
May-10
Dec-10
Apr-11
May-11
Apr-12
Dec-07
May-08
Dec-08
May-09
Dec-11
May-12
Sep-09
Sep-07
Sep-08
Sep-10
Sep-11
Sep-12
Aug-07
Aug-08
Feb-10
Aug-11
Aug-12
Feb-07
Feb-08
Nov-08
Feb-09
Aug-09
Aug-10
Feb-11
Feb-12
Nov-07
Nov-09
Nov-10
Nov-11
Jul-09
Jul-10
Jul-07
Jul-08
Jul-11
Jul-12
Jan-08
Jan-12
Jan-09
Jan-10
Jan-11
Oct-07
Oct-10
Oct-11
Oct-08
Oct-09
Jun-08
Jun-12
Jun-07
Jun-09
Jun-10
Jun-11
Performance quoted from Morningstar as at 30 September 2012 for a lump sum investment with income
distributions reinvested
22. Coronation Balanced Defensive Fund
Positive returns over all 12-month periods
Rolling 12 Month Returns & Standard Deviation
20.00%
15.00%
10.00%
5.00%
0.00%
Dec-10
Dec-11
Dec-08
Dec-09
Sep-10
Sep-11
Sep-08
Sep-09
Sep-12
Aug-10
Aug-11
Aug-08
Aug-09
Nov-10
Nov-11
Aug-12
Nov-08
Nov-09
Feb-11
Feb-12
Feb-08
Feb-09
Feb-10
Jan-11
Jan-12
Jan-09
Jan-10
Jul-10
Oct-10
Mar-11
May-11
Jul-11
Oct-11
Mar-12
May-12
Mar-08
May-08
Jul-08
Oct-08
Mar-09
May-09
Jul-09
Oct-09
Mar-10
May-10
Jul-12
Jun-11
Jun-12
Jun-08
Jun-09
Jun-10
Apr-11
Apr-12
Apr-08
Apr-09
Apr-10
-5.00%
Coro Balanced Defensive Mean Prud Low Eq Coro Ann Std Dev Mean Ann Std Dev
Performance quoted from Morningstar as at 30 September 2012 for a lump sum investment with income
distributions reinvested
23. Coronation Balanced Defensive Fund
Consistent 1st quartile performance
Since
1 Year 3 Year 5 Year
launch
Ranking 10/66 3/53 1/40 2/35
Quartile 1st 1st 1st 1st
Returns 15.9% 12.4% 10.9% 10.7%
Category
13.0% 9.8% 7.6% 8.0%
Average
Performance quoted from Morningstar as at 30 September 2012 for a lump sum investment with income
distributions reinvested
24. Coronation Balanced Defensive
Asset Allocation since launch
100%
Int Fixed Income/Cash
90%
SA Pref Shares/Other
80%
70% SA IL Bonds
60% SA Corp Bonds
50% SA Gov Bonds
40% max exposure to growth assets
40%
SA Cash
30%
Real Estate
20%
Int Equities
10%
SA Equity
0%
Mar 07
Mar 08
Mar 09
Mar 10
Mar 11
Mar 12
Dec10
Sep 07
Sep 08
Sep 09
Sep 10
Sep 11
Aug 12
Sep 12
Jun 07
Dec 07
Jun 08
Dec 08
Jun 09
Dec 09
Jun 11
Dec 11
Jun 12
Jul 12
June 10
Growth Assets are defined as domestic/foreign equities (excl. Pref shares), listed property &
commodities. Asset Allocation as at 30 September 2012
25. Coronation Balanced Defensive
Portfolio positioning
SA Corp Bonds 34.5%
SA Equity 8.5%
SA Cash 14.4%
Int Equity 18.7%
Income
Assets Growth
67.6% Assets
SA IL Bonds 12.1%
32.4%
Domestic Real
4.3%
Estate
Int. Cash / Bonds 5.0%
Reg. 28 Compliant International
0.9%
Real Estate
SA Pref Shares & Other 1.6%
Growth Assets are defined as domestic/foreign equities (excl. Pref shares), listed property &
commodities. Asset Allocation as at 30 September 2012
27. R 150.000
R 250.000
R 400.000
R 100.000
R 200.000
R 300.000
R 350.000
R 450.000
R 500.000
R 50.000
reinvested.
Jun-01
Aug-01
Oct-01
Dec-01
Feb-02
Apr-02
Jun-02
Aug-02
Oct-02
Dec-02
Feb-03
Apr-03
Jun-03
Aug-03
CPIX +4%
Oct-03
Dec-03
Feb-04
Apr-04
Jun-04
Aug-04
Oct-04
Dec-04
Coronation Capital Plus
Feb-05
Coronation Capital Plus
Apr-05
Jun-05
Aug-05
Oct-05
Performance since launch
Dec-05
Feb-06
Apr-06
Jun-06
Aug-06
Oct-06
Mean of Domestic AA Pru Variable Equity
Dec-06
Feb-07
Apr-07
Jun-07
Aug-07
Oct-07
Dec-07
Feb-08
Apr-08
Jun-08
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Jun-09
Aug-09
Oct-09
Value of R100,000 invested on 02 July 2001
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Performance quoted from Morningstar as at 30 September 2012 for a lump sum investment with income distributions
Feb-12
Apr-12
Jun-12
Aug-12
R240 660
R380 840
R455 736
28. reinvested.
-30.00%
-10.00%
-20.00%
20.00%
10.00%
30.00%
40.00%
0.00%
50.00%
Jun-02
Aug-02
Oct-02
Dec-02
Feb-03
Apr-03
Jun-03
Aug-03
Oct-03
Dec-03
Feb-04
Apr-04
Jun-04
Aug-04
Oct-04
Dec-04
Feb-05
Apr-05
Rolling 1 Year Returns
Jun-05
Coronation Capital Plus
Aug-05
Oct-05
Dec-05
Feb-06
Apr-06
Jun-06
Aug-06
CPIX +4%
Oct-06
Dec-06
Feb-07
Apr-07
Jun-07
Aug-07
Oct-07
Coronation Capital Plus
Dec-07
Feb-08
Apr-08
Jun-08
Aug-08
Oct-08
Dec-08
Feb-09
Apr-09
Mean of Domestic AA Pru Variable Equity
Jun-09
Aug-09
Oct-09
Dec-09
Rolling 12 month return since 02 July 2001
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Performance quoted from Morningstar as at 30 September 2012 for a lump sum investment with income distributions
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
29. Coronation Capital Plus Fund
Consistent 1st quartile performance
1 Year 3 Year 5 Year 10 Year Inception
Ranking 7/44 4/40 6/32 1/7 1/5
Quartile 1st 1st 1st 1st 1st
Returns 15.2% 11.6% 9.3% 14.3% 14.4%
Category
11.6% 8.6% 7.2% 10.3% 10.9%
Average
Performance quoted from Morningstar as at 30 September 2012 for a lump sum investment with income
distributions reinvested
30. Coronation Capital Plus Fund
Bear Market Returns
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
-25.0%
-30.0%
-35.0%
-40.0%
Jul 01 - Sept 01 Jun 02 to Apr 03 Mar 04 to Apr 04 Mar 05 to Apr 05 Nov 07 to Jan 08 Jun 08 to Mar 09 Apr 10 to Jun 10 May 11 to Sep 11
Cap Plus Bal Med Eqt mean ALSI Pru Var Equity Pru Low Equity
Performance quoted from Morningstar as at 31 August 2012 for a lump sum investment with income
distributions reinvested.
31. Coronation Capital Plus Fund
Bull Market Returns
180.0%
160.0%
140.0%
120.0%
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
Oct 01 to May 02 May 03 to Feb 04 May 04 to Feb 05 May 05 to Oct 07 Feb 08 to May 08 Apr 09 to Mar 10 July 10 to Apr 11 Oct 11 to Feb 12 Mar 12 to Aug 12
Cap Plus Bal Med Eqt mean ALSI Pru Var Equity Pru Low Equity
Performance quoted from Morningstar as at 31 August 2012 for a lump sum investment with income
distributions reinvested.
32. Coronation Capital Plus
Asset Allocation History
100%
Int Cash/FI
90%
SA Pref Shares & Other
80%
SA IL Bonds
70%
60% SA Corp Bonds
50% SA Gov Bonds
40%
SA Cash
30%
Max exposure to growth assets reduced to 60% Real Estate
20%
Int Equities
10%
SA Equity
0%
Jun 07
Jun 08
Mar 11
Jun 12
Jul 12
Dec10
June 11
Mar 07
Mar 08
Mar 09
Mar 10
Mar 12
Jun10
Sep 07
Sep 08
Jun 09
Sep 09
Sep 10
Sep 11
Aug 12
Sep 12
Dec 07
Dec 08
Dec 09
Dec 11
Growth Assets are defined as domestic/foreign equities, listed property & commodities (excl Gold).
Asset Allocation at as 30 September 2012.
33. Coronation Capital Plus
Portfolio Positioning
SA IL Bonds 10.7%
SA Equity 32.5%
SA Corp Bonds 15.6%
Growth Int Equity 15.5%
Income Assets
Assets 54.1%
SA Cash 6.4% 45.9%
Domestic Real
3.7%
Estate
SA Pref
5.9%
Shares/Other
International
2.4%
Real Estate
Int. Cash/FI* 7.3%
Growth Assets are defined as domestic/foreign equities, listed property & commodities. As at 30
September 2012. *Including effect of foreign currency hedge against foreign assets.
34. Protection strategies
Philosophy guiding protection strategy
Deployed to protect, not to make money
(i.e. like buying insurance without the benefit of a no-claims bonus....)
No automatic rollover or renewal
(each transaction is evaluated separately before implementation)
Level at which you buy protection far more important than price of volatility
(hence we prefer an active approach)
Aim to spread levels of protection as far as possible
(in terms of strikes, terms and expiry dates)
Will not off-lay costs by assuming unlimited liabilities on the downside!!
(See our experience during GFC....)
35. Protection strategies
Our experience around protection over the last 12 months
Buying at-the-money puts work best if the market trends strongly up or down
Given lacklustre market performance over past year (with no big sell-offs)
insurance didn't really add to portfolio performance
But it did allow us to continue buying some of cyclical shares into weakness,
knowing that we are protected in the event of a disaster hitting global growth
Cost of protection continued to decline as appetite for risk increased, hence some
mark-to-market losses on volatility also experienced
Estimated cost was around 80-90 basis points on overall portfolio
36. Actual experience in Capital Plus since inception
Value of R1m invested 11 years ago given different real income rates
No income 3% 5% 7% 9%
Nominal Real Nominal Real Nominal Real Nominal Real Nominal Real
Money market fund 2,280,321 1,173,079 1,433,732 735,802 1,051,237 538,638 770,192 393,999 563,847 287,975
Coro Strategic Income 3,012,251 1,549,956 1,893,927 972,196 1,388,660 711,689 1,017,407 520,582 744,830 380,495
Coro Capital Plus 4,053,696 2,085,889 2,548,728 1,308,356 1,868,773 957,774 1,369,163 700,587 1,002,346 512,061
Change in income level between 2001 and April 2012 after adjustment for inflation
3% 5% 7% 9%
Initial income per R1m invested in 2001 30,000 50,000 70,000 90,000
Initial income as % of initial capital 3.0% 5.0% 7.0% 9.0%
Current income adjusted for inflation 58,212 97,021 135,829 174,637
Current income as % of nominal capital
Average money market fund 4.1% 9.2% 17.6% 31.0%
Coronation Strategic Income 3.1% 7.0% 13.4% 23.4%
Coronation Capital Plus 2.3% 5.2% 9.9% 17.4%
As at 30 April 2012 – includes 0.75% annual adviser/admin fee
37. Actual experience in Capital Plus since inception
Value of R1m invested 11 years ago given different real income rates
No income 3% 5% 7% 9%
Nominal Real Nominal Real Nominal Real Nominal Real Nominal Real
Money market fund 2,280,321 1,173,079 1,433,732 735,802 1,051,237 538,638 770,192 393,999 563,847 287,975
Coro Strategic Income 3,012,251 1,549,956 1,893,927 972,196 1,388,660 711,689 1,017,407 520,582 744,830 380,495
Coro Capital Plus 4,053,696 2,085,889 2,548,728 1,308,356 1,868,773 957,774 1,369,163 700,587 1,002,346 512,061
Change in income level between 2001 and April 2012 after adjustment for inflation
3% 5% 7% 9%
Initial income per R1m invested in 2001 30,000 50,000 70,000 90,000
Initial income as % of initial capital 3.0% 5.0% 7.0% 9.0%
Current income adjusted for inflation 58,212 97,021 135,829 174,637
Current income as % of nominal capital
Average money market fund 4.1% 9.2% 17.6% 31.0%
Coronation Strategic Income 3.1% 7.0% 13.4% 23.4%
Coronation Capital Plus 2.3% 5.2% 9.9% 17.4%
As at 30 April 2012 – includes 0.75% annual adviser/admin fee
39. Disclaimer
Coronation Asset Management is an Authorised Financial Service Provider.
The content of this presentation and any information provided may be of a general nature and may not be based on any analysis of the
investment objectives, financial situation or particular needs of the client. (as defined in the Financial Advisory Intermediary Services
Act) As a result, there may be limitations as to the appropriateness of any information given. It is therefore recommended that the client
first obtain the appropriate legal, tax, investment or other professional advice and formulate an appropriate investment strategy that
would suit the risk profile of the client prior to acting upon such information and to consider whether any recommendation is appropriate
considering the client’s own objectives and particular needs.
Any opinions, statements and any information made, whether written, oral or implied are expressed in good faith.
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