A record of outperforming

Fund manager insights:

The Allan Gray Stable Fund is a Regulation-28 compliant asset allocation fund, which means that it invests in a range of asset classes, such as shares, bonds, cash, property and offshore assets.

According to Mark Dunley-Owen, portfolio manager, exposure to these asset classes varies, depending on the opportunities presented at a point in time. 

“One of the key benefits of investing in an asset allocation fund is that the fund manager, and not the investor, bears the responsibility of managing the underlying asset class exposure within the fund,” says Dunley-Owen.

“The fund manager has the flexibility to alter the exposure to various asset classes, based on available opportunities. The returns investors ultimately experience come from all the different components that make up the fund.”

The fund can invest a maximum of 30% offshore, with an additional 10% allowed for investments in Africa outside of South Africa.

It typically invests the bulk of its foreign allowance in a mix of funds managed by Orbis Investment Management, Allan Gray’s offshore investment partner.

He says that the fundamentals of assets such as bonds, cash and shares are analysed to determine their intrinsic or underlying value or worth.

“We then compare this with the price the market places on them. We buy assets that we believe are priced lower than what they worth, with a margin of safety,” says Dunley-Owen.

“When the market has recognised the asset’s value, or when the price approximates our estimation of the asset’s underlying worth, we sell it.”

The fund performance over suitable investment time periods is mainly impacted by the valuation of assets in the fund, he explains.

According to Dudley-Owen, they believe the shares and bonds in the fund are attractively valued and should provide lower-risk investors with attractive returns over medium- to long-term horizons. 

Many factors could however affect the short-term price of the fund, ranging from local political stability to global interest rates.

“Rather than try to predict these, the fund is positioned to limit the impact of events such as these on long-term value,” he says.

Why finweek would consider adding it:

Since inception and over the latest five- and 10-year periods, the fund has outperformed its benchmark and CPI inflation, while providing a high degree of capital stability. 

The lowest annual return numbers show that the fund has not yet experienced a negative return over any rolling 12-month period.

It was also the top South African fund to 31 December 2017 on straight performance in the Multi-Asset Low-equity Fund category at this year’s Raging Bull Awards.

This article originally appeared in the 24 May edition of finweek. Buy and download the magazine here, or sign up for our weekly newsletter here.