Allan Gray Balanced Fund Fact Sheet 2022: The Balanced Fund strives to produce long-term wealth for investors by balancing income creation, capital growth, and risk of loss through a varied asset mix. Our objective is to outperform similar unit trusts while taking no additional risk. Participants who invested in Allan Gray Global Balanced (closed) before March 1, 2015, will have access to the same portfolio. Domestic assets are subject to a 0.65 percent annual fee.
There are three methods to invest based on a single philosophy:
We believe in keeping things simple at Allan Gray, which is why we only provide three funds to our investors. Each fund offers a variety of investing possibilities, allowing you to take advantage of our long-standing contrarian philosophy. Thanks to our innovative investment approach, your portfolio will profit from unusual investments that are often undervalued and neglected but have the potential to rise in value over time. This method can help Allan Gray reach his long-term goals. Long-term expansion The Balanced Fund is a suitable alternative for investors desiring a lower level of risk than a pure equities fund. One of its most essential characteristics is that it aims to protect investors when the market is down.
A breakdown of international assets is as follows:
RRF charges 0.60 percent annually plus 25% of outperformance (excluding the base cost) over its benchmark, which is refundable if it underperforms again. In any given year, Orbis can only receive 2.6 percent of the total price (base plus performance charge) in cash. The selection’s benchmarks are 60% MSCI World Index (net dividends reinvested) and 40% JP Morgan Global Government Bond Index. This portfolio is subject to an annual investment management charge of 0.15 percent (excluding VAT), which is not covered by a Sanlam insurance policy.
The Allan Gray Balanced Fund has been Around
The Allan Gray Balanced Fund celebrated its 20th anniversary this year. Regardless of the current status of the local sector, investors are still looking for well-diversified funds that can meet their needs. Duncan Artus looks back on the Fund’s history and current status. The first unit trusts in South Africa were founded in the mid-1960s. By the end of 1999, there were 271 unit trusts on the market, with a combined market capitalization of R108 billion, according to the South African Journal of Business (2001).
According to data from the Investment Company Institute, the local company has grown considerably since then, with over 1600 unit trusts available to investors. As a result, the country is now ranked 20th in the globe in terms of assets under administration in terms of dollar value. In the 1999 Allan Gray Unit Trust Annual Report, Jack Mitchell, chairman of the unit trust business, remarked, “Rising markets inevitably herald the likelihood of increased risk.” As a result, our unit trust services have expanded to include a “balanced fund” that follows the Prudential Investment Guidelines for retirement funds established by the Pension Funds Act.
A safety net in the event of a catastrophe
Since the inception of Allan Gray, our definition of investment risk has always been the risk of permanently losing investor money. We actively attempt to limit our exposure to market drops, so increasing the amount of capital available to take advantage of market gains, in order to protect clients’ wealth in the Balanced Fund. Because of its capacity to guard against downside risk, the Balanced Fund has outperformed its peer-group benchmark and South African equities over time (despite the Fund’s lower equity exposure), as shown in Graph 1 (despite the Fund’s lower equity exposure).
There are talks these days about Portfolio Positioning
The Fund has a broad investment mandate in order to maximize our investment philosophy. The relative attractiveness of various asset classes, such as stocks, bonds, commodities, properties, and cash, is used to make asset allocation decisions. The most appealing assets are those that we believe have a fair chance of providing positive returns over the Fund’s investment horizon, and portfolio managers make this determination.
Graph 2 depicts the asset allocation of the Fund over time. As a result, the Fund’s current position is vastly different from when it was established, with 30% of its assets invested offshore and only 3% in African assets outside of South Africa. Portfolio managers now have the opportunity to diversify their assets thanks to changes in exchange control regulations. Although the stock selection of our offshore partner Orbis has had a negative influence on the portfolio’s performance recently, we believe they are a crucial diversity element and will generate value in the long run. The following paragraphs will go through this in further depth.
Positioned to take advantage of a wide range of opportunities
There’s no way to predict what will happen in the future, and there are numerous possibilities. Our portfolio design efforts are focused on creating well-diversified portfolios that can generate good returns while also protecting investors from any negative outcomes. This, we believe, explains why a Fund founded more than two decades ago remains relevant today. The current state of the Fund’s risk management capabilities is depicted in Chart 3: Due to the depreciation of the South African currency, it is critical to have a diverse portfolio of foreign currencies in order to limit risk.
Two-thirds of the portfolio is held offshore, with listed South African companies with earnings produced in foreign countries accounting for 30% of the portfolio, which should benefit from rand weakness. Despite its rand-based currency, the Fund holds about 60% of its assets in a range of foreign currencies. Inflation is eroding the real value of investments, which can be offset by investing in real assets. Long-term cash investments are vulnerable to hazards including not being able to keep up with rising inflation.
Against inflation, 70% of Fund’s assets invested in real assets
Keeping the South African economy from collapsing and the government’s ability to fund itself. South Africa is well aware of its governance and financial problems, which are jeopardizing its investment-grade status. We carefully examine the local market for good value opportunities, but we are also conscious of the risks involved. It is vital to study a range of sources in order to assess one’s own performance.
The annualized return of the Balanced Fund from its inception on October 1, 1999, has been 15.8 percent. An R10,000 investment on October 1, 1999, at the original unit price of R10, would have climbed to R189 107.61 on September 30, 2019, at the closing unit price of R104.72, after fees and dividends were reinvested. As shown in Graph 4, ASISA Multi-Asset High Equity had an annualized return of 11.8 percent over the same time period, with an R10,000 investment growing to R92 341. The ALSI would have increased to R145 055.61 in a year if the same amount of money had been put into it (before fees but with dividends reinvested).
Experiencing the highs and lows
We believe that a diversified portfolio has several levers to rely on in pursuit of long-term returns in diverse conditions assuming the assets in the portfolio were obtained at a reasonable cost. We have worked extensively over the past 20 years to build the Balanced Fund to maintain and grow your cash in volatile and unpredictable times.
