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Allan Gray responds to Magnus Heystek

Investment management company reacts to columnist’s comments.
Allan Gray exercises its right of reply. Image: Moneyweb

We note Magnus Heystek’s opinion article entitled ‘How to plan for a dreadful retirement’.

We would like to correct Mr Heystek with the following general comments:

– South African Reserve Bank (Sarb) regulations separately restrict Allan Gray Unit Trust and Allan Gray Life to investing 40% of assets held on behalf of retail investors offshore. These entities are not allowed to exceed these limits. The restrictions that we have put in place on offshore allocation for some of our unit trusts and some of the products underwritten by Allan Gray Life, such as our Living Annuity, are in place to comply with Sarb regulations.

– It is important to note that individual investors in these products have no restrictions imposed by the Sarb on how much they may allocate offshore. Since the entities through which they invest via these products are limited to 40% offshore, this can create the potential for misalignment between individuals’ specific preferences and what each Allan Gray entity is able to facilitate. In managing our offshore capacity at Allan Gray, we always try to balance the needs of each individual investor, whether existing or new, so that our products meet the needs of most clients in a way that is fair.

– We believe in the importance of offshore diversification in a manner which is appropriate for each individual’s risk tolerances and overall objectives. Where we are not bound by exchange controls, we will do what we can to make it easier for clients to invest as much as they need to offshore. We have recently lowered the minimums on our offshore platform, and we can facilitate currency conversion through an authorised dealer. 

Referring to some specific comments made by Mr Heystek:

– The offshore restrictions for Living Annuities issued by Allan Gray Life referred to in the article have been applied to existing and new investors in this product. We were very deliberate in not favouring new clients at the expense of existing clients. In fact, existing clients whose offshore exposure in their Living Annuities exceeded 60% before the limits were put in place have been able to maintain their offshore exposure at whatever they had before the restrictions were implemented. The restrictions are therefore more likely to impact new business than existing business. It is important to note that we were compelled to apply these restrictions to ensure that Allan Gray Life does not breach the 40% of assets regulation.

– Mr Heystek would prefer to have 100% of assets abroad. The limits imposed at Allan Gray are set at a level that (i) ensures that Allan Gray Life is able to comply with the limit of 40% imposed by the Sarb and (ii) gives most investors the opportunity to have an offshore allocation that meets their long-term needs.

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The reply from Alan Gray makes sense, seems unavoidable and implementation of restrictions is handled in a fair manner.
I am not involved with Alan Gray or the financial services industry whatsoever but only an experienced investor.

As usual Magnus does not let facts get in the way of a good article.

Rubbish KS. Magnus tells it like it is. No PC cr@p. Whether it is 40% or 60% is not the point. Read ham’s comments to see what it is about.If you still do not get it then the unabridged collection of speeches by Zuma is for you.

The fact remains that you can get 100% offshore with other platforms.60% is not enough for many investors.

Why would investors submit to such a ludicrous restriction when other platforms, like Sygnia for instance, provide 100% offshore allocation in their Living Annuity product already? It makes no sense to stick with Old ‘n Gray. Move on.

I am curious, is this 40% limit apply only to Alan Gray or others too? I was under the impression that the limit is 60%, which is still low in my opinion, but if other companies are allowed higher percentage this rule seems to be unfair.

From the little I know about this stuff after doing some research into offshore investing, I think all investment managers are subject to the same 40% limit. What is different between the companies is then the popularity of their local vs offshore funds. I think when some investors invest in local funds and some choose offshore funds it balances each other out, but when lots of people start investing offshore (and also start switching funds out of local and into offshore funds), that’s when the scale tips and some companies then find themselves having to limit offshore exposure internally to balance things out. I think that’s what the 60% limit on their LA was all about, managing products so that the company as a whole can be in compliance.

I’m not sure if my understanding is correct though, but hey that’s my 2c.

You’re 100% right uMlawuli

Haystack is like a pillock named Clive Roffey who was obsessed with gold in low level media except he is obsessed with offshore.
Some day the tide will come in and he will drown just like Roffey.

Whats wrong with gold? I was just looking at a chart the other day that showed since 2005 it’s done 14.5% pa in ZAR’s?

You would have done better investing directly in the USD$. Gold is going backwards.

AngeloJoe – it is not a matter of a tide that will come in and drown a few, it is the social tsunami of social instability, over-regulation, unemployment, uncertain economic growth, exchange rate volatility and ethical scandals that are already flooding us and which is getting momentum by the day that will eventually engulf and destroy capitalism and all capital assets of all those who do not follow MH’s advice.

Remember, this only refers to the living annuity. People should have discretionary funds in addition to this for their retirement and for these funds there is no restriction other than the annual allowances imposed by SARB. One needs to look at the overall allocation, not per fund.

This is not a matter of a tide that will come in and drown a few, it is a tsunami of social instability, over-regulation, unemployment, uncertain economic growth, exchange rate volatility and ethical scandals that are already flooding us and which is getting momentum by the day that will eventually engulf and destroy capitalism and all capital assets of all those who do not follow MH’s advice.

Negative much? Watch the USA market implode with higher rates… So Trump cut taxes and now the budget deficit is at a all time high – Magnus, much like trump believes his own lies.

Watch the US market implode and the SA market takeoff. Is that the insinuation? You stay where you are and let’s see who is right in 10 years you or Magnus. Make that 5 years.

Really – I’m I writing in invisible ink? No that is not what I said! – But you would be stupid to buy at the top of the US market – Especially with a president like Trump. The Nasdaq is at a 40 P/E – So it will take you 40 years at current earnings to make your money back – But be my guest and buy.

End of comments.

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