Emeka Okolo is the head, Coronation Asset Management, a fund and investment management company. He speaks in this interview with Iheanyi Nwachukwu. Excerpts
How well has Coronation Asset Management Limited built strategic partnerships with clients?
At the heart of everything we do, is a commitment to serve our customers. We are constantly pushing the boundaries of service delivery, pioneering new products and looking for better ways to serve our customers. We do all this because we understand that financial resources are scarce. So, when it comes to making investment decisions for our customers, we have to always get it right the first time every time.
Nothing speaks more to our ability to create value for customers like the quality of our past investments decisions for our clients. In 2017 we launched three mutual funds and all three recorded huge subscription levels. The success of our mutual funds attest to the progress we have made in building strategic partnerships and reflect the loyalty and support we enjoy from our customers.
In Nigeria, a lot of families struggle to effectively transfer wealth in a manner that meets the financial goals of their future generation. One of the ways we build strategic relationship is by creating trans-generational wealth.
As a fund manager you believe investment risks should be properly analysed and understood. How often do you communicate with your clients on your analysis on possible market risks or opportunities?
Understanding investment risk is paramount to making money irrespective of whether you are making investments in Real Estate, Bonds, and Treasury Bills. A lot of people keep cash in their bank accounts with the belief that the money is safe and yes, it is. However, if the interest you earn from that deposit is less than the prevailing inflation rate, your money is exposed to devaluation risk.
Given the importance of knowing and managing investment risk, at Coronation, a critical first step in our client engagement process is working with our clients to understand all possible types of risk, and thereafter undergoing a comprehensive assessment of their appetite for the identified risk. Using this approach, we are able to decide the right investment solutions that align with our clients’ risk appetite, and we can then generate the desired investment goals.
Knowing that market conditions are never static, we further evaluate the identified risk in line with prevailing market conditions and changing customer circumstances. With this proactive process and the discipline we introduce to it, we can, to a high probability, properly articulate the right investment strategy that reduces risks as much as possible. Obviously, our clients are carried along in this process with timely information to enable them to make proper investment decisions.
We have also put a lot in place to ensure our risk management governance framework is of global standards. In addition to this, the oversight functions of our Board of Directors, whom have over 100 years of combined experience in financial markets enable us to properly dimension risk and profer investment solutions. You see, when it comes to making investments, poor assessment and inadequate monitoring of investment risk, especially in a volatile economy as ours is the fundamental reason why individuals and institutions fail to meet their investment goals.
Do you adhere to global standards of investment codes of conduct when developing investment solutions of your clients?
Yes we do. As an organization registered with the Securities and Exchange Commission of Nigeria, we are mandated to uphold various regulatory codes for capital market operators. Also, all staff of the organisation are mandated to abide by the Chartered Financial Analyst Code of Ethics and Standards of Professional Conduct. Keeping these codes of conducts are important to us as a business, because we are accountable to clients, regulators, stakeholders and the capital market to ensure that we always act in a professional and ethical manner, which is independent of any conflict of interest.
Therefore, it is a matter of obligation for us to employ utmost care in developing investment solutions for clients irrespective of status. We are very diligent in our approach and take into consideration all possible scenarios when analyzing financial markets and investments. Without these codes, especially in a developing market like ours where clients need solid reassurance and resolve to adhere to professional standards, you will find a situation where it will be difficult to build or create the environment of trust required for strategic partnerships with our clients. Hence, at Coronation, we take adherence to these codes very seriously and we have put in place processes by which we are constantly trained and kept abreast of these commitments which have now become a way of life for everyone at Coronation.
As a portfolio manager, effective risk management is very important to ensure improved returns to your clients who may either be retail, ultra and high net-worth individuals. So, what are your strategies around risk management?
We have a four-step strategy around risk management namely: 1) Risk Identification (2) Measurement (3) Risk Control 4) Risk Monitoring and Reporting. These four steps are very much integrated in our investment culture and we are much disciplined about how we carry them out at Coronation. We all know that risk cannot totally be eliminated; therefore it is apt that we have clearly defined risk tolerance limits for all types of investments we undertake as a business on behalf of our clients. However, we employ primarily the evergreen principle of efficient diversification of investments to sufficiently eliminate as much risk as we possibly can.
Through diversification, we have acceptable exposure limits between all types of investments. We invest in such a proportion that we can efficiently meet client goals. For instance, if an individual client in their middle age wants to start saving towards retirement, as a rule of thumb we start by applying the 60/40 rule – 60percent and 40percent of their investments in risky and non-risky assets respectively. However, as stated initially, we consider the client’s risk appetite and circumstance as well as market conditions before we finally arrive at an acceptable ratio between risky and non-risky investments. Now, consistent monitoring of investments is more important than the actual investment process. Hence, as part of our risk management strategy we continuously review the investments we have made, and whenever necessary take the required actions to rebalance them appropriately in line with market realities. From an organisational standpoint, our risk governance process requires that all risk practices and results be reported to our Board of Directors frequently, as evidence of the importance we give to managing risk.
How do you describe your investment management approach at Coronation Asset Management?
We are value investors by nature, always seeking for investments that have growth potentials backed by strong fundamentals. This philosophy is our guiding principle to investing. Before we make any investment whatsoever, we conduct a thorough global and domestic economic and financial market evaluation seeking for the best value out there depending on what our clients’ goals are. At Coronation, we are very proud of the quality of our research, which underpins all our investment decisions and we make sure that our clients are well informed about all our actions. A big advantage we have at Coronation and one that we clearly promote is the diversity our people bring onboard. This diversity in knowledge and experience enables us to make decisions collectively, in the best interest of our clients. Hence, we have an Investment Committee that is responsible for ensuring we remain disciplined in our approach to investing and that clearly established investment guidelines are adhered to.
Please give us more insight on your asset management services for individual and institutional clients?
Coronation Asset Management is a Fund and Investment Management company. For our Fund Management business, we currently have 3 mutual funds in offering: Coronation Money Market, Fixed Income and Balanced Funds which were launched in September 2017 after a successful and well subscribed Initial Public Offer, as we raised a total of N2.1billion from individual and institutional clients. Today, we are proud because we have seen a significant growth of 1.9percent in the total asset size of our mutual funds. Our idea of launching 3 funds simultaneously was to meet the investment and risk needs of different types of investors. We continue to build and develop distribution and sales channels that will make these mutual funds easily assessible especially to retail investors. An important value proposition for our mutual funds is that irrespective of how little the investor has to save to meet their financials goals, they will have access to Coronation’s professional investment managers who will ensure their investment goals are met. Mutual funds are very popular investment products that support retail investors to pool monies just like the traditional Esusu schemes. Investors are able to enjoy the benefits of economies of scale and competitive pricing amongst others. On the other hand, the investment management business provides bespoke investment solutions using multiple asset classes, financial advisory and research to individuals and corporate organizations who are looking to meet numerous investment goals. For individuals, these goals could range from targeted savings for asset acquisition such as building a home or buying a car. Others include saving for retirement, and education for children and wards. The investment needs of corporation organizations are often more specialized in nature, and involve finding how best to maximize the return on their assets to adequately provide for whatever liabilities they may have as well as a surplus for profit. Here we leverage on our unique benefit of being part of a Merchant Bank group to work closely with this clients. Also, we act as investment managers and financial advisers for gratuity or any related savings schemes they may have for their staffs or cooperative societies. Furthermore we can work with Endowments, Foundations and Family Offices in meeting their investment goals. One thing is for certain, at Coronation, we are very swift in our response to clients’ needs and always ensure we provide the best service quality available.
As a member of Fund Managers’ Association of Nigeria (FMAN) under the fund/portfolio managers’ category, how has this trade group helped in bonding operators particularly in the area of complaint management?
FMAN is a self-regulatory association that works closely with the Securities and Exchange Commission to promote the formulation, adoption and practice of best standards as well as support the continuous growth of the Asset Management industry in Nigeria. Through this collaboration, it seeks to ensure that investors’ confidence remain very high through transparent and fair practices by fund/portfolio managers.
Therefore, any investor that feels that they have been unfairly treated by any fund/portfolio manager has a platform through the FMAN that ensures their complaints are immediately resolved. Hence, through FMAN, best standards of professionalism and ethics in the industry are always upheld.
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