NAV on 2019/01/18
|NAV on 2019/01/17
|52 week high on 2018/09/03
|52 week low on 2019/01/02
|Total Expense Ratio on 2018/09/30
|Total Expense Ratio (performance fee) on 2018/09/30
Allan Gray Unit Trust Management (RF) Pty Limited
The market value-weighted average returns of funds in the South African - Equity - General category (excluding Allan Gray funds).
Duncan joined Allan Gray in 2001 as an equity analyst after completing his Honours in Business Science and post graduate diploma in Accounting at the University of Cape Town. He is a CFA charter holder and was appointed a trainee portfolio manager in January 2003.
As of 1 January 2005, Duncan was promoted to the position of portfolio manager and will be managing a portion of the balanced and equity portfolios of the segregated and life clients.
Allan Gray Equity comment - Sep 18
The FTSE/JSE All Share Index (ALSI) returned a modest 6.7% per year for the past three years, against an inflation rate of 5.2% over the period. More recently, the ALSI is down 3.8% year to date. Fortunately in investing, the lower the historic market returns, the greater the potential for improved returns in future.
We have not found value in domestically orientated industrial stocks for many years, however the negative sentiment towards South Africa is finally beginning to reflect in share prices and value is beginning to emerge. The chance to buy undervalued companies is always exciting and we will look to take advantage of any opportunities.
MTN, a company which we have thought to be substantially overvalued for many years, finally fell below our fair value estimate in September. The price declined from just over R100 to a bottom of R70 in just a few days as investors became concerned about the Nigerian risks. The risks associated with doing business in Africa are pervasive but they became clear to investors when the Nigerian government asked MTN to repatriate US$8.1bn in dividends it had paid from 2007 to 2015. This presented a buying opportunity. Unfortunately it was only brief, as the share price quickly moved back towards our fair value estimate, eliminating the margin of safety.
Glencore was the Fund’s largest purchase during the quarter. Similar to MTN, regulatory issues surrounding their African operations, together with fears about slowing global growth, created a buying opportunity. We have carefully considered the Democratic Republic of Congo issues. The risks to metal demand caused by a Chinese or global slowdown are also very real. The question is whether these risks are discounted in the price. We believe they are and there is a sufficient margin of safety between our estimate of fair value and the share price for us to buy the share.
When valuing commodity companies we use an estimate of through-thecycle commodity prices to estimate normal earnings. The share prices of commodity companies often discount spot commodity prices, which can create opportunities when prices fall, as is the current case with the copper price.
Conversely, Sasol’s discount to fair value narrowed sharply as the share price rallied with the higher oil price and weaker rand. Sasol was our biggest sale in the quarter. We were also sellers of Old Mutual as its value became clearer to investors post the Quilter unbundling and recent results.
Commentary contributed by Andrew Lapping
The Fund invests primarily in shares listed on the Johannesburg Stock Exchange (JSE). The Fund may buy foreign assets up to a maximum of 25% of the Fund, with an additional 5% allowed for African ex-SA investments. The Fund invests the bulk of its foreign allowance in equity funds managed by Orbis Investment Management Limited, our offshore investment partner. The Fund is typically fully invested in shares. Returns are likely to be volatile, especially over short- and medium-term periods.