The Allan Gray Balanced Fund is a unit trust that targets to invest up to 45% of its assets offshore. The fund invests in a variety of assets, including stocks, bonds, real estate, commodities, and cash.
Allan Gray Balanced Fund requires an R1,000.00 minimum monthly debit order contribution. Ad hoc contributions of R1,000.00 or more can also be made to boost the balance at regular or different intervals.
Those who wish to make a lump sum contribution to the unit trust must invest a minimum of R50,000.00. The fund’s maximum net equity exposure has been set at 75%.
The Allan Gray Balanced Fund has over 568 million units, with each unit costing R138.62. The fund has a total fund size of R173 billion which is invested in different instruments.
The Allan Gray Balanced Fund invests most of the funds in the unit trust in different companies. Here are some of the companies that the fund invests in.
|British American Tobacco||5.4|
Objectives of the Allan Gray Balanced Fund
The objective of the Allan Gray Balanced Fund is to buy shares at a discount aiming to achieve positive outcomes in the near future. Fund managers use research and expertise to inspect different companies to assess their intrinsic value.
Investments in these companies are for the long term. The focus is mainly on realising equity value increase in the future rather than at present.
This long term objective enables Fund managers and executors to buy shares that are looked down upon by the stock market.
This happens mostly because the short-term prospects show poor results at the time.
If the stock market doesn’t offer any attractive shares, the company looks at other better alternatives. The Fund also invests in bonds, property, commodities, and cash.
Allan Gray Balanced Fund Strategy
There is no fund that does well in the market like the Balanced Fund does, without a proper working strategy. The Balanced Fund has put up a rather not sophisticated strategy but one that works to achieve the fund’s objectives.
The balanced fund’s goals are to invest in shares of companies, commodities, bonds issued by companies and the government, and cash. By trying to invest in these categories, the fund splits its funding by doing the following:
- investing a maximum of 45% of the fund offshore.
- investing a maximum of 10% in Africa, except for South Africa.
- Investing the rest of the funds in South Africa
Investments offshore are managed by Orbis Investments limited which is a partner of Allan Gray. Offshore investments are mostly in shares while the South African investments are held by JSE listed companies.
The maximum net equity exposure of the Fund is 75%. The Fund may use exchange-traded derivative (ETFs) contracts on stock market indices to reduce net equity exposure from time to time.
Who Should Invest in The Allan Gray Balanced Fund
The Balanced Fund offers an investment opportunity that is long term. With this in mind, the Balanced Fund is suitable for individuals with the following goals.
- Those seeking steady long-term capital growth.
- Typically have an investment horizon of more than 3 years
- Those that are comfortable with taking on some risk of market fluctuation and potential capital loss, but typically less than that of an equity fund.
- Those who wish to invest in a unit trust that complies with retirement fund investment limits.
Choosing the Balanced Fund as your investment of choice is the first step to investing at Allan Gray. The next crucial step that you have to take is to choose an account.
Yes, an account! Allan Gray offers 7 accounts that one can choose from when investing in a unit trust. The choice is all yours. Your account choice will depend on the reason you are investing.
To get a much-needed clarity on accounts you need to talk to a consultant before making a choice. People invest in Allan Gray for a number of reasons and some of the reasons include retirement, living income, and savings on taxation.
Below we cover the account that can be used to invest in the Allan Gray Balanced Fund.
Basic Unit Trust Investment Account
This account offers flexibility and lets you have access to your money as and when you need it. The account is suitable for any goal that one can have hence you can invest for retirement or save for a vacation using this account.
The minimum investment for this account is R20,000.00. If you want to invest more money you can do so. If you are not able to pay R20,000.00 as a single lump sum, you can pay an amount of R500 per month.
Tax-free savings account
An Allan Gray Balance fund’s tax-free savings account is an account that doesn’t require you to pay any taxes from your earnings. There is a special condition though. For an account to qualify as a tax-free account, annual deposits must not be more than R36,000.00, and lifetime deposits must not exceed R500,000.00.
Like the basic unit trust, you need a minimum of R50,000.00 to start with your investment or you can invest R1000 per month.
Retirement Annuity Account
This account is for those who want to take advantage of the tax exclusions that a retirement annuity offers. You will need to invest a minimum of R50,000.00 as a lump sum payment or R1000 per month.
Offshore Investment Account
This account is for those who want to diversify their portfolio across different economies. To start with your investment you will need to deposit a lump sum of R50,000.00 or $3500. Alternatively, you can deposit a sum equivalent to $3500 in pounds, yen, or Euros.
This account is for those whose marginal tax rate is higher than 30% and need an account that offers estate planning benefits and tax efficiency. You can invest a lump sum of R50,000.00 or R1000 per month.
Preservation fund Account
This account is for those who want to preserve and grow their existing retirement savings until they are ready to retire and need to start drawing an income. A preservation fund will require you to invest a lump sum of R50,000.00 or more.
This account is for those who need to start drawing an income from their retirement savings. The minimum investment on a living annuity account is R125,000.00 as a lump sum payment.
Know your fees
There are fees associated with the Allan Gray Balanced Fund. These costs cannot be avoided. Before calculating performance figures, the Balanced Fund’s expenses, include the investment management fee, and more.
As a result, you will incur these fees before anything else. You must pay a 0.95% investment management fee, a 0.03% administration fee, and 0.11% VAT. Your total fees will be around 1.09% of your total investment.
The Allan Gray Balanced Fund offers a number of opportunities to grow your money and to invest responsibly. The Fund allows you to invest your money on a pool that regularly out beats the market, in the process providing sustainable growth.