Why does it matter that we invest our money in the same way that we invest yours?
We know that we need to earn your trust
There are certain things in life that you can only entrust to the experts, like your and your family’s health. To trust any expert with an important life decision requires trust and credibility. When you ask your doctor if he would use the medication or undergo the treatment that he prescribes himself or give to his family, it would give you great peace of mind if he says ‘yes’. (On the other hand, you would be very concerned if he said ‘no’.) The conviction and credibility of his recommendation is sealed when he is willing to apply it to his own life. The same applies to investing your hard-earned money.
When it comes to following an investment strategy, we do what we say we will
We write and talk a lot about our contrarian approach to investing – we go against the crowd and aim to underpay rather than to overpay for any investment we buy. We believe this is the most effective way to grow wealth over time. In fact, we are so convinced about the approach that we invest our own money this way. All of these accounts invest in the same investments as our clients, on the same basis and according to the same terms.
Even our business is structured to make sure that we benefit if our clients benefit
Our business is privately owned by people who work at Allan Gray Australia. The owners’ equity is tied up while they work for the firm, PLUS 10 years after they leave the firm. This incentivises senior management and the owners to make good long-term business decisions. From an investment point of view, to apply our contrarian approach successfully requires us to take a long-term view (because it takes time for market perceptions about stocks that are currently unloved to normalise). We also charge performance-based fees so that if our clients receive better performance, we earn better fees.
We are therefore incentivised to a much higher degree than many other investment managers to ensure that we take a long-term approach in all our business and investment decisions.
And this isn’t just what we say…
According to the independent research firm Lonsec, one of the strongest features of the management of the Allan Gray Australia Equity Fund is its alignment of interest with investors. In fact, they regard the level of co-investment by the team as rare. This provides evidence of our conviction in our investment philosophy.