Allan Gray Equity Fund is a unit trust with 52 million units each valued at R350.00. The Equity Fund portfolio has investments of R32 billion as of 2020 with investments in the technology industry, oil and gas, telecommunications, finance, healthcare, and utilities.
The Equity Fund aims at creating long term wealth for its investors. With purchases of stocks, bonds, property, and commodities, the fund holds these over a period of 1 year to create value for investors.
The Equity Fund is one of the most successful equity investment unit trust in the world. Allan Gray Equity Fund has shown incredible growth since its inception in 1998.
Over the past 5 years, the fund has recorded a 3.5% annual increase. This give is favourable considering the average of 1.5% that was made by unit trusts in the South-African-Equity-General category.
Objectives of the Allan Gray Equity Fund
Allan Gray’s Equity Fund’s objective is to create long term wealth for investors. The objective is straightforward and easy to understand. The fund is definitely not to yield immediate returns.
Instead, through the Equity Fund, the fund managers invest in shares that have the potential for higher returns over time. The Equity Fund aims to beat the average performance of similar unit trusts without taking more risks.
You need to understand that unit trust returns fluctuate due to market inefficiencies. Short to medium term results show fluctuations that can even go on a negative.
For example, for the year 2019, the fund lost 2.6% but looking at a 10-year profit or loss the fund increased by more than 10%. This fund is only suitable for long term investments of 5years or more.
Allan Gray Equity Fund Strategy
To achieve a goal, you need to have a strategy in place, and so does the Allan Gray Equity Fund. According to the Allan Gray website, managers use research to identify and buy shares in companies that they believe are undervalued by the market.
The Fund invests in shares that are listed on the Johannesburg Stock Exchange. The Equity Fund has thresholds for different regions of investment. The investments of the fund are split into the following:
- A maximum of 30% of the fund can be invested offshore. Most of the offshore investments are held by Orbis Investments.
- Can invest a maximum of 10% of the fund in Africa besides South Africa.
- The rest of the fund can be invested in South Africa.
Allan Gray Equity Fund’s investment is mostly in shares. The fund uses a benchmark to track progress on profit or loss. It uses the South African-Equity-General Fund average as its benchmark.
The Fund invests in a
selection of shares across all sectors of the stock market, and across the range of large, mid, and smaller-cap shares.
Who is suitable for the Equity Fund?
The equity fund is suitable for a certain type of investors. We can safely conclude that the Equity Fund is suitable for:
- Those who are comfortable with stock market fluctuation, i.e. short- to medium-term volatility
- Those who are prepared to accept the risk of capital loss
- Typically have an investment horizon of more than five years
- Wish to use the Fund as an equity ‘building block’ in a diversified multi-asset
From the above list, you can see that the fund is volatile and can make losses. There are no guarantees that you will make money within your investment’s lifetime. But history has taught us that the Equity Fund always bounce back from difficulties to yield favourable results.
So when choosing the equity fund as your investment option from Allan Gray, think long term. Long term means at least five years, but the longer you invest, the better your returns on investment will be.
Accounts to choose from
The type of account that you choose with Allan Gray will determine the type of investor you are. Different accounts from Allan Gray offer different tax opportunities that you can exploit.
Allan Gray offers seven accounts that you can choose for your investment in the Equity Fund. The account that you are going to choose will determine the minimum amount you can invest.
Accounts that you can use to invest
The accounts that you can choose from include:
- Basic Unit Trust Investment – this account is for those who want to grow money in an account that offers flexibility. The basic unit trust investment account is suitable for any financial goals. To invest with the basic unit trust investment account you need to deposit a lump sum of R20,000.00 or deposit R500 every month.
- Endowment – this account is for those with marginal tax returns at 30% or more and needs offshore estate planning. To invest you need to deposit R20,000.00 lump sum and/or R500 per month.
- Tax-free investment – this account is for those who want to enjoy tax-free returns on investment. This account has a limit though. You can only invest up to R36,000.00 per year and R500,000.00 in a lifetime of this investment. To invest you need a minimum lump sum deposit of R20,000.00 and/or R500 deposits per month.
- Offshore investment – this account is for those who want to diversify their portfolio in different economies and regions. To invest you need to deposit R20,000.00 lump sum or $1500 or that equivalent in pounds, Yen or Euros.
- Retirement Annuity – this is for those who want to save for retirement and take advantage of taxes. The minimum investment is R20,000.00, alternatively, you can deposit R500 per month
- Preservation Fund – 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. To invest in the preservation fund you need to deposit R50,000.00 lump sum.
- Living Annuity – this account is for those who want to start drawing income from their investment. The minimum investment is R100,000.00 lump sum.
The table below shows all the companies that the Equity Fund has a shareholding in. However, only the top 10 fund investment are shown.
|British American Tobacco||7. 1|
|Standard Bank||3. 8|
|Old Mutual||1. 9|
Investment in the Allan Gray Equity Fund can yield favourable results over time. With such an investment you can plan for retirement or purchase an asset that you desperately need.
The fund is not foolproof, it has its ups and downs but history has proven that the fund is stable over time. When investing, the Allan Gray Equity Fund is an investment opportunity that you need to consider.