About the Allan Gray Australia Balanced Fund
Investment approach and objective
To seek long-term returns that are higher than the Benchmark. In doing so, the Fund aims to balance capital growth, income generation and risk of loss using a diversified portfolio.
What does the Fund portfolio look like?
The Fund invests in shares, fixed income, commodity investments and cash using our contrarian, long-term and fundamental investment philosophy.
Generally, around 60% of the Fund’s portfolio will be invested in Australian investments, with the remainder in international investments. When Australian investments are more appealing the Fund may invest more in Australia – or vice versa. The Orbis Group will manage the international component of the Fund. Orbis is Allan Gray’s sister company and has successfully managed global equities for 25 years. Like Allan Gray, the Orbis Group was founded by Dr Allan Gray and shares the same investment strategy and philosophy.
Allan Gray and Orbis Group will actively select shares and corporate bonds where we think that they offer value and/or their income potential is better than the Fund’s Benchmark. The Fund may also invest in Government bonds, cash or indirectly in commodities like gold through commodity-linked instruments.
While the Fund has no market sector investment targets, it’s expected to hold:
- 40-90% of its portfolio in shares
- 10-50% of its portfolio in fixed income and cash
- 0-10% of its portfolio in commodity-linked investments.
From time to time the Fund may move outside these ranges in order to pursue its objective. The range is very broad and the Fund flexible, enabling us to take advantage of opportunities when they arise and meaning the Fund could look quite different from its peers.
The Fund’s Benchmark
The Fund uses a custom benchmark consisting of:
- 36% S&P/ASX 300 Accumulation Index
- 24% S&P/ASX Australian Government Bond Index
- 24% MSCI World Index (net dividends reinvested) expressed in AUD
- 16% JPMorgan Global Government Bond Index expressed in AUD.
How the Fund invests
The Allan Gray philosophy has three main principles – Long-term, Contrarian and Fundamental:
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- Long-term – we take a long-term view. When we look for value we are willing to look through short-term bad news that may be affecting the share price and wait for an investment’s true value to be realised. In a competitive market, practicing patience can give you a distinct advantage.
- Contrarian – we take a contrarian approach to investing by avoiding popular trends and uncovering opportunities in areas where others aren’t looking.
- Fundamental – we concentrate on understanding an investment’s core value, and the fundamental factors that determine this, rather than trying to forecast the next share price move.
We determine the Fund’s holdings within each asset class based on where we find the best value. We won’t buy a share or bond simply because it’s part of the Fund’s custom benchmark – it has to offer value and we only invest if we believe it will increase the Fund’s overall return. We will not buy a commodity-linked investment if a share or bond can provide exposure to the same underlying commodity more attractively.
We believe that over the long term investing in undervalued shares and bonds offers the potential for higher returns.
Read more about our approach to investment management.
What to expect from the Fund’s portfolio
- A consistent investment approach
Allan Gray has more than 10 years’ experience in managing Australian shares, while the Orbis Group has managed global shares for over 25 years. We both use the same long-term, contrarian and fundamental investment philosophy. Australian investors can now access this deep experience, and the investment opportunities this philosophy identifies, through one fund.
- Flexibility in asset allocation
The Fund is not constrained to particular global markets or industries. We can also adjust the Fund’s allocation to shares, fixed income, commodity investments or cash depending on where we find value, the potential for capital growth and income, and risk of loss. This flexibility to adapt to changing market conditions and to vary the Fund’s exposure to different assets over time enables us to aim to both enhance the Fund’s long-term returns and reduce the impact of large market falls.
- Access to a broad asset mix
The Fund offers a simple way to access a broad mix of investments through a single fund. Using Allan Gray’s and Orbis Group’s contrarian investment approach the Fund can also provide exposure to investment opportunities that may not be easily invested in by individual investors.
The Fund charges an annual base fee of 0.75%, and a performance fee of 20% of any outperformance of its benchmark. You can find out more about our fee structure here.
Main risks associated with investing
All investments carry risk. If you are considering the Allan Gray Australia Balanced Fund, you should be aware:
- There is no guarantee your investment will do well
Please remember that we do not guarantee the success, repayment of capital or any rate of return on income, capital or investment performance of the Fund. In particular past performance is not necessarily an indicator of future performance.
- Global markets can be volatile
The Fund will primarily hold Australian and international shares and bonds. As these markets can be volatile, your investment in the Fund may fluctuate. In addition, some of the markets in which the Fund invests may be considered emerging markets, which carry their own risks such as political and social instability.
- Although a large portion of the Fund will be held in Australian assets, currency movements will impact performance
Fluctuations in exchange rates can have a significant influence on the Fund’s international investments, and could impact overall returns of the Fund.
You can find a comprehensive explanation of the risks in our Product Disclosure Statement (PDS) , which should be read in conjunction with the Information Booklet.
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