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Allan Gray Stable Fund Review 2022

Allan Gray Stable Fund is a unit trust that currently sells over 587 million units at a price of R35.00 per unit. The fund manages more than R45 billion in assets. Andrew Lapping, Leonard Kruger, and Mark Dunley-Owen administer the Allan Gray Stable Fund. The Fund’s objective is to maintain a high level of capital stability and to minimize risk of loss over a two-year period while generating long-term returns that outperform bank deposits.

The Fund’s benchmark is First Rand Bank Limited’s daily interest rate on fixed deposits (FNB fixed deposit nominal interest rate) plus 2%. Since the fund’s inception in 2000, the Allan Gray Stable Fund has outperformed the benchmark. The Fund invests in a diversified portfolio of assets, including money market instruments, stocks, bonds, real estate, and commodities. Today, the fund has invested R45.00 billion.

The Allan Gray Stable Fund may invest up to 30% of its assets offshore. Additionally, the fund may invest an extra 10% in Africa other than South Africa, bringing the fund’s total overseas interests to up to 40%. The Fund’s offshore assets are invested in a portfolio of unit trusts managed by Orbis Investments. Allan Gray Ltd’s offshore investment partner is Orbis investing.

Allan Gray Stable Fund investment stategy

Allan Gray’s investment philosophy, as a firm, has been compared to that of Warren Buffet. This is because Allan Gray, the company’s founder, considered investments as a form of long-term capital management. The primary purpose of the Fund is to generate favorable returns over the medium or short term. A viable and effective approach is required to accomplish this.

The Allan Gray Stable Fund approach entails investing in stocks, bonds, and other asset classes for an extended period of time in order to generate positive returns. In a nutshell, the fund does not engage in speculation.

The Fund is broken into three investment points which include:

  • 60% of investments in South Africa.
  • Up to 30% of investments offshore.
  • Up to 10% of investments in Africa except for South Africa.

The breakdown of investing suggests that the Stable Fund is South Africa centric. Today local investments take 63% of the fund while 37% is in offshore investments.

Allan Gray Stable Fund Current investments

With over R45 billion in assets under management, the Stable Fund will work diligently to generate annual returns in excess of 10%. This is due to the fund’s size. However, when it comes to investing, size does important. For example, a fund with billions of dollars must invest in well-established firms, whereas a fund with tens of millions must invest in high-growth small, medium, and large businesses.

The Allan Gray Stable Fund, like the Allan Gray Stable Fund, invests mostly in well-established enterprises. The Stable Fund invests in companies such as Nespars, British tobacco, and Standard Bank. Investments in established businesses typically see stable growth and give security. On the other hand, investments in start-ups might result in exponential development or, conversely, can result in the company’s demise within a few years.

The Stable Fund seeks to achieve favorable growth and returns while minimizing capital risk. Bear in mind that investing in the Stable Fund exposes you to the risk of losing money. There are no guarantees that market conditions will always favor the fund. However, when used as an index, the fund can weather some of the harshest economic downturns, like the 2008 financial crisis and, more recently, the Covid-19 pandemic.

Below is a table that shows the local and offshore investments from the Stable Fund.

Local Investments (Portfolio %) Offshore Investments (Portfolio %)
Property2. 10
Commodity linked2. 31.2
Hedge Equity5. 38. 4
Bonds26.87.1
Net Equity 17. 915.1
Money Market and Bank deposits8. 75.1

Top 10 company investments

The table below depicts the top 10 companies that the Stable Fund invested in and the percentage of the portfolio.

Company NamePortfolio percentage
Naspers3. 9
British American Tobacco3. 3
Glencore1. 9
SDPR Gold Trust1. 2
Aspen1. 1
Taiwan Semiconductor MLG1.1
Standard Bank1. 1
NetEase1. 1
AbbVie1. 1
Woolworths1

Investing in Allan Gray Stable Fund

Allan Gray Stable Fund offers investment opportunities for everyone. Regardless of your income, you can invest in the Stable Fund. Allan Gray offers 7 accounts that you need to choose from when investing in the Allan Gray Stable Fund.

Account to choose from

The seven accounts include:

  • Basic unit trust investment account – this is a standard account from Allan Gray that offers flexibility. To invest using the basic unit trust investment account, you need to deposit R20,000.00 lump sum and/or R500 per month.
  • Tax-free investment account – the tax-free savings account offers a 0% tax liability. To use this account you should not invest over R36,000.00 in 1 year and must not invest more than R500,000.00 in a lifetime. To start an investment you need to deposit R20,000.00 lump sum and/or R500 per month.
  • Retirement Annuity account – this account is for those saving for retirement and want to benefit from the tax advantages that a retirement annuity offers. To invest in a retirement annuity account you need to invest R20,000.00 as a lump sum payment and/or R500 per month.
  • Offshore investment account – this account is for those who want to diversify their portfolio across different economies and regions outside South Africa. To start your investment you will need to deposit R20,000.00 lump sum or $1500. Alternatively, you invest an amount equivalent to $1500 in Yens, Pounds, AUD, or Euros.
  • Endowment account – this account is for those with a marginal tax rate higher than 30% and need an account that offers estate planning benefits and tax efficiency. You can invest R20,000.00 to start your investment and/or R500 per month.
  • Preservation Fund Account – this is for those that want to preserve and grow existing retirement savings until they are ready to retire and need to start drawing an income. To invest in a preservation fund you need R50,000.00.
  • Living Annuity account – this is for those that need to start drawing an income from my retirement savings. You need at least R100 000 lump sum.

Conclusion

The Allan Gray Stable Fund offers great opportunities to grow money for different purposes. Investment in the fund can yield you favourable returns. Allan Gray has made it easy for different investors to invest in the Stable Fund. Those with retirement funds, planning for retirement, or want to take advantage of the fund’s taxfree account the Stable Fund takes care of them.

Lethabo Ntsoane

Lethabo Ntsoane holds a Bachelors Degree in Accounting from the University of South Africa. He is a Financial Product commentator at Rateweb. He is an expect financial product analyst with years of experience in reviewing products and offering commentary. Lethabo majors in financial news, reviews and financial tips. He can be contacted at [email protected]

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