NAV on 2019/01/18
|NAV on 2019/01/17
|52 week high on 2018/09/05
|52 week low on 2018/04/04
|Total Expense Ratio on 2018/09/30
|Total Expense Ratio (performance fee) on 2018/09/30
Allan Gray Unit Trust Management (RF) Pty Limited
South African--Multi Asset--Low Equity
The daily interest rate as supplied by FirstRand Bank Limited plus 2%
Allan Gray Stable comment - Sep 18
Over recent time periods, the Allan Gray Stable Fund has delivered returns in line with its dual objectives of capital stability and outperforming bank deposits. On a relative basis, it has outperformed higher-risk asset classes such as bonds and equities. This relative outperformance is unusual given the lower-risk nature of the Fund, and we do not expect it to hold true over long time periods.
The portfolio of shares within the Fund has outperformed the FTSE/JSE All Share Index, largely due to the shares that the Fund has avoided. The Fund had little or no exposure to shares which have experienced material price declines such as Steinhoff, MTN, Aspen and Resilient..
Avoiding such shares has partly been due to luck. Mistakes are inevitable in investing and there are sure to be future commentaries where we apologise to clients for disappointing investments.
However, avoiding such shares is also partly due to our investment process based on bottom-up, fundamental research. A common characteristic of many companies that the Fund has not invested in is a lack of cashflow. Some of these companies have overly complex financial accounting that makes it difficult to determine the true cashflow, while others trade at prices that we believe are not justified by their cashflow. Instead, the Fund favours investing in companies that are priced at reasonable multiples of sustainable cashflow. This ranges from companies with stable cashflow generation, such as British American Tobacco, to fast-growing companies that are able to reinvest their cashflow at high returns such as Chinese technology company Tencent, the main contributor to Naspers’ valuation. Our focus on cashflow does not guarantee success, but it significantly improves the odds of the Fund meeting its objectives.
The Fund added to its position in companies such as Glencore, Naspers, Remgro and MTN, following what we view as an excessive price reaction to negative news and bought selected property shares.
The Fund’s foreign allocation (excluding Africa) was reduced from 29.9% to 26.4% following rand weakness, mostly via a smaller holding in Orbis’ Optimal Funds. Dollar bonds issued by MTN and Seplat, a Nigerian oil and gas company, were bought at attractive yields. The duration of the fixed interest portion of the Fund was increased from 1.5 to 1.8 years as South African yields increased.
Commentary contributed by Mark Dunley-Owen
The Fund invests in a mix of shares, bonds, property, commodities and cash. The Fund may buy foreign assets up to a maximum of 25% of the Fund (with an additional 5% for African ex-SA investments). The Fund typically invests the bulk of its foreign allowance in a mix of funds managed by Orbis Investment Management Limited, our offshore investment partner. The maximum net equity exposure of the Fund is 40%. The Fund's net equity exposure may be reduced from time to time using exchange-traded derivative contracts on stock market indices. The Fund is managed to comply with the investment limits governing retirement funds. Returns are likely to be less volatile than those of an equity-only fund or a balanced fund.