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Discover the Allan Gray difference. Learn more about our Funds including performance and download offer documents.
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The information contained in this section is for adviser and wholesale investor use only.
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The Allan Gray Australia Funds are available for investment by New Zealand retail clients.
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Fund Commentary – Quarter in review
In this extract from the September 2019 Quarterly Commentary we review the Allan Gray Australia Funds over the last quarter. Click here to read the full Quarterly Commentary.
Allan Gray Australia Equity Fund
The Australian share market was up 2.6% for the third quarter, having fallen during August, but recovering to near all-time highs by end September.
The Allan Gray Australia Equity Fund outperformed its ASX 300 benchmark by 1.8% for the last quarter, despite further underperformance in some of the sectors where we have larger exposures. While energy was again one of the weaker sectors (+0.1% for the ASX300 Energy Sector), some of our energy positions bucked the sector trend, with Origin Energy in particular contributing positively. Materials was also one of the weaker sectors, but again our stock selection there contributed positively, with Newcrest and Alumina contributing to outperformance.
In contrast, our largest energy position Woodside Petroleum was the largest detractor from performance. The weakest area of the market from a sector basis was communication services, and our exposure there to Telstra also detracted from performance.
Allan Gray Australia Balanced Fund
The Allan Gray Australia Balanced Fund underperformed its composite benchmark by 0.4% in the third quarter. Overall equity exposure contributed positively to relative returns. Part of the global share exposure is hedged, which detracted from returns as the market rose, but which should provide some protection in those periods where market indices fall. The Fund has around 67% in equities but including the hedging, the total net equity exposure is 59%.
The Fund’s exposure to gold contributed positively during the quarter as the gold price rose.
For the roughly 28% of the portfolio currently invested in fixed income and cash, we remain significantly shorter in duration than the benchmark – at around one and a half years versus around seven and a half years for the benchmark. This detracted from relative performance in an environment of falling interest rates. However, the Fund should be more defensively positioned than the benchmark in terms of both relative and absolute returns, in the event interest rates rise.
Allan Gray Australia Stable Fund
The Allan Gray Australia Stable Fund outperformed its RBA cash rate benchmark by 1% in the third quarter.
The performance of the Stable Fund is driven by the performance of our favoured Australian share holdings, and the decision on how much is invested in shares versus cash. The exposure to shares can range from zero to 50% of the Fund, and the allocation over time is illustrated by the red shaded area in the graph below. As the share market has risen strongly over the course of the year, we have reduced the Fund’s overall exposure to shares. At the end of the third quarter, exposure to selected shares remains around the lowest in the history of the Fund at around 23%. We have, however, added to positions in out of favour shares, such as Woodside Petroleum, where we believe the price is too low and good value is on offer.
Stable Fund portfolio weightings – equity allocation falls when there is less value in equities
Source: Allan Gray Australia as at 30 September 2019
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Equity Trustees Limited ABN 46 004 031 298, AFSL No. 240975 is the responsible entity and issuer of units in the Allan Gray Australia Equity Fund ARSN 117 746 666, Allan Gray Australia Balanced Fund ARSN 615 145 974, and Allan Gray Australia Stable Fund ARSN 149 681 774 (Allan Gray Funds). Equity Trustees is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX: EQT). Allan Gray Australia Pty Limited ABN 48 112 316 168, AFSL No. 298487 is the investment manager of the Allan Gray Funds. Neither Allan Gray Australia Pty Limited, Equity Trustees Limited nor any of their related parties, their employees or directors, provide any warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it.
Past performance is not a reliable indicator of future performance. There are risks involved with investing and the value of your investments may fall as well as rise. This represents Allan Gray Australia Pty Limited’s views at a point in time and may provide reasoning or rationale on why we bought or sold a particular security for the Allan Gray Funds or our clients. We may take the opposite view/position from that stated, as our view may change. This insight is not an offer or recommendation, constitutes general advice or information only and not personal financial product, tax, legal, or investment advice. It does not take into account the specific investment objectives, financial situation or individual needs of any particular person and may not be appropriate for you. We have tried to ensure that the information here is accurate in all material respects, but cannot guarantee that it is.
You should consider the relevant Product Disclosure Statement (PDS) before acquiring, holding or disposing of units in an Allan Gray Fund. The PDSs, Target Market Determinations (TMDs) and Minimum Disclosure Documents for South African investors (MDDs) can be obtained from our Forms & Documents page. Each TMD sets out who an investment in the relevant Allan Gray or Orbis Funds might be appropriate for and the circumstances that trigger a review of the TMD.
Managed investment schemes are generally medium to long-term investments. They are traded at prevailing prices and the value of units may go down as well as up. There are risks with investing the Fund and there is no guarantee of repayment of capital or return on your investment. Subject to relevant disclosure documents, managed investments can engage in borrowing and securities lending. A schedule of fees and charges is available in the PDS.
