In 2-quart saucepan, mix sugar, evaporated milk, butter and eggs yolks and cook over medium heat, while stirring, until mixture begins to bubble, approximately 12 minutes. Remove from heat and set aside.
Mix coconut and pecans in a large bowl to break up any clumps of coconut. Pour caramel sauce over pecans and coconut, add vanilla, and stir until it reaches spreading consistency (it will thicken as it cools). Cool completely before frosting cake.
Note: Pecan pieces can be toasted in a 350° oven for 5 minutes until aromatic, before adding to the frosting, if desired.