Allan Gray Money Market Fund Review 2023

Allan Gray Balanced Fund

Allan Gray Money Market Fund is a unit trust with 23.5 billion units and a R25.4 billion market value. The net asset value is set at R1.00 per unit. The Alexander Forbes Short-term Fixed Interest (STeFI) composite index serves as the benchmark for the Allan Gray Money Market Fund, which seeks higher returns than a bank deposit.

Since its inception, the fund has produced excellent returns. Since its inception, the Allan Gray Money Market Fund has averaged an annual return of 7.6%, outperforming its benchmark by an average of 0.20%. Long-term returns show that the fund is a strong performer and one of the best money market funds in South Africa.

For benchmark performance, the Allan Gray Money Market Fund charges a management fee of 0.25%. The fund’s total investment fee is 0.29%, which includes a 0.04% VAT charge.

A minimum lump sum investment of R50,000.00 is required to begin investing in the Allan Gray Money Market Fund. Another option is to make R1,000.00 ad hoc payments into the fund. Individuals can also make a monthly debit order investment of R1,000.00 into the account.

Since it complies with Regulation 28, the fund can be used to invest in a variety of investment vehicles. The types of accounts in which the fund can be invested are discussed further below.

Allan Gray Money Market Fund Qualifying Accounts

Allan Gray understands that different individuals invest for different reasons. Some want to take tax advantages, others want to grow their retirement payout, etc. With a number of considerations, Allan Gray caters for different types of investors.

There are 7 types of accounts that one can choose from when opening the Money Market Fund. The account types are:

  • Basic unit trust,
  • Tax-free investment,
  • Retirement Annuity,
  • Offshore investment,
  • Endorsement,
  • Preservation fund and
  • Living Annuity.

We will discuss all the account types that you need to choose from and their significance.

Basic unit trust investment

By choosing a basic unit trust investment as your account type, you get flexibility. Flexibility means that you can access your money anytime without any interruptions.

This account has no transaction fees, no penalties, and you can make changes to your investment whenever. The basic unit trust investment account gives you whole access to your account and to do as you wish.

The minimum amount that you can invest with a basic unit trust investment account is R500 a month. If you don’t want to invest monthly, you can invest a lump sum of R20,000.00 or more to start your investment. There is no restriction on the maximum amount to invest per annum.

Tax-free investment

If you want to take advantage of taxes then this account might be for you. According to the South African government for an account to qualify as a tax-free investment account, the investment will need to

  • Not have an investment of more than R36,000.00 in one year,
  • Not invest more than R500,000.00 in a lifetime.

These two restrictions are important when you choose the tax-free account. SARS notes that all investments that qualify as a tax-free investment are not liable for taxation.

The minimum investment of a tax free investment is

  • Minimum of R500 per month and/or
  • R20,000.00 lump sum investment.

Retirement Annuity

This account option is for those who want to save for retirement but also want to take advantage of taxes. However, this account comes with some restrictions. Your money will be kept for your retirement, therefore, you won’t be able to have access to your money.

The retirement annuity account gives you peace of mind as your money will be protected from potential creditors. The money is yours and you will only have it when it matures which is on retirement.

To start investing with the retirement annuity account you need to invest a lump sum of R20,000.00 or more.

If you don’t have a lump sum equivalent then you can opt for a less expensive option of R500 per month or more.

You can make changes to your account by increasing your monthly instalments or lump sum payments at no extra cost.

Offshore investment

Those who want to diversify their investment portfolio across different economies can choose this account. The account offers flexible investment in regions outside South Africa.

You can have your account quoted in Euros, American Dollars, Japanese Yen, Australian Dollars, or British pound. There are restitutions on the options available to certain foreign investors.

To invest in this account you need to start with R20,000 or more as a lump sum investment. Alternatively, you can invest $1,500 dollars as your lump-sum investment or any amount equivalent to $1,500 in GBP, JPY, AUD, or EUR.

Endowment

The account is for those with estate planning in mind and aiming for tax efficiency. If your tax is higher than 30% then you can gain more from choosing the endowment account.

Since an investment in Allan Gray comes with expertise from tax practitioners and advisors, you will save more on tax from your investment.

The account comes with free estate planning services that you can take advantage of at will. A group of advisors will help with making sure that you take advantage of your tax benefits.

To invest with the Endowment account through the Money Market Fund, you can start with a lump sum investment of R20,000.00.

Otherwise, you can invest R500 per month if you don’t want the R20,000.00 option. However, you can choose to invest a lump sum of R20,000.00 and add R500 or more to your investment.

Preservation Fund

If you want to preserve and grow existing retirement savings then the preservation fund account is for you. The account allows you to transfer your existing retirement savings at no additional cost.

The money that you invest will be ready when you retire. When you retire you will be able to withdraw money from the fund according to your specifications. You will take advantage of taxes by simply choosing Allan Gray.

To invest in this fund/account you will need to invest a lump sum of R50,000.00 or more. This amount is higher than the minimum amount requirement from earlier account types.

Living Annuity

This account gives you the liberty to withdraw money from your account on retirement.

You can withdraw money at different intervals such as withdrawal of interest every 14 months.

The option will be up to you as an account holder when to access your retirement savings.

The minimum amount to invest for living annuity account is R100,000.00. This amount is highest on the list of accounts from Allan Gray.

The reason behind the high lump sum requirement is that it is long term and money will be withdrawn at different intervals on retirement.

Allan Gray Money Market Fund Objectives

The Money Market Fund aims to maintain the value of the investment, allowing investors access to their money whenever they need it.

While maintaining the value of the fund, the Money Market managers want to make sure that they maintain a sound level of income for their investors.

The Fund targets return higher than the Alexander Forbes Short-Term Fixed Interest Composite Index.

This is the benchmark that Allan Gray Money Market Fund uses to monitor its level of growth at any point.

The Money Market Fund is a low-risk investment but fund managers always make sure that they are on top of their game

. Although losses are sometimes inevitable, the fund always performs better.

Returns on the Money Market Fund may not keep up with inflation at certain points in time. The value of your investment may decline when taking inflation into consideration.

Factors of inflation and losses are all the backbone of decision making when fund managers make investments.

So caution is important as risk is always calculated with safeguards always in place.

Allan Gray Money Market Fund Strategy

Allan Gray Money Market Fund invests in company shares, commodities, bonds issued by companies and the government, and cash. With all these types of investments in place, the strategy lies in the distribution of the fund portfolio.

The Money Market Fund invests its funds in three ways. Ways the fund is split includes:

  • Maximum investment of 30% of the fund offshore.
  • A maximum of 10% investment in Africa but excluding South Africa.
  • The rest of the fund to be invested in South Africa.

Investment offshore is managed by Orbis Investments which is Allan Gray’s offshore partner. Most of the fund is invested in South Africa as the primary investment region with investments mostly in the JSE listed companies.

Who suitable for the ALLAN Gray Money Market Fund?

Investment in the Money Market Fund is not for everyone. Allan Gray has different investment funds for different purposes. So, the Allan Gray Money Market Fund is suitable for:

  • Require monthly income distributions
  • Are highly risk-averse but seek returns higher than bank deposits
  • Need a short-term investment account

As much as the Allan Gray Money Market Fund is a speculatory fund, it has some stability.

This is a low-risk investment so unlike speculating on commodities or Forex with the Money Market Fund you don’t risk losing most or all of your investment.

Since the fund has billions in investments, with a small investment you will be able to take advance of the financial leverage in place.

Money Market Fund Investments

The Money Market Fund has R25,4 billion in investments as of 2023. Investing such a large sum of money necessitates a great deal of knowledge and experience. The fund’s managers have made several profitable investments in the past that have contributed to the fund’s favourable performance to this day.

The banking sector accounts for the majority of the fund’s holdings, with approximately 91.7% invested in banks. The fund is invested in all 5 of South Africa’s major banks, with an additional interest in Investec.

Below is an investment portfolio of the Money Market Fund.

CompanyPortfolio %
Nedbank22.4%
Investec Bank21.6%
Standard Bank 18.7%
Absa Bank15.8%
FirstRand Bank13.2%
Shoprite 2.6%
Sanlam 2.4%
AVI1.6%
Pick n Pay 1%

Cost of investing

Like any other unit trust, the Money Market Fund has fees and performance bonuses in place. As an employer, you will need to pay your employees which is Allan Gray Investments in this case.

The Money Market Fund’s expenses, including the investment management fee, are deducted before performance figures are calculated. Money Market Fund charges an investment management fee of 0.25%.

You will also need to pay an additional 0.04% in VAT charges. Your total fees will be 0.29%.

Conclusion

Allan Gray Money Market Fund provides good value in the short and medium term. The fund is arguably South Africa’s most secure money market fund, with a strong track record of success.

Before opening an account with Allan Gray, you should consult with an advisor about your options.

An advisor will assist you in making better investment decisions for tax purposes or for retirement.

Allan Gray is a member of the FSCA, which oversees how the fund’s funds are spent and distributed. Your investment will always be secure, and all reports will be correct.

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