Allan Gray Stable Fund Review 2020

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  • Post last modified:Oct 9, 2020
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Allan Gray Stable Fund Summary

Allan Gray Stable Fund is a unit trust with over 587 million units currently selling at R35.00 per unit. The fund has over R45 billion in assets under management. Allan Gray Stable Fund is managed by Andrew Lapping, Leonard Kruger and Mark Dunley-Owen

The Fund aims to provide a high degree of capital stability and to minimise the risk of loss over any two-year period while producing long-term returns that are superior to bank deposits.

The Fund’s benchmark is the daily interest rate as supplied by First Rand Bank Limited (FNB fixed deposit nominal interest rate) plus 2%. Allan Gray Stable Fund has outclassed the benchmark since the fund’s formation in 2000.

The Fund invests in a mix of assets that include money market instruments, shares, bonds, property, and commodities. Today the fund is worth R45.00 billion in investments.

The Allan Gray Stable Fund can invest up to a maximum of 30% of its fund offshore. Also, the fund can invest an additional 10% in Africa besides South Africa, thus, totalling foreign investments of up to 40% from the fund.

The offshore investment of the Fund is invested in a mix of unit trusts managed by Orbis Investments. Orbis investment is Allan Gray Ltd’s offshore investment partner.

Allan Gray Stable Fund investment stategy

As a company Allan Gray’s investment strategy has been compared to that of Warren Buffet. This is because the founder of Allan Gray, Allan Gray viewed investments as a long term capital management.

The Fund’s main objective is to create favourable results for the medium or short term period. To achieve this, a working and effective strategy need to be in place.

The Allan Gray Stable Fund strategy involves investing in stocks, bonds, and other investment types for a significant period of time to yield positive results. In short, the fund doesn’t speculate.

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 under management, the Stable Fund will put in much work to bring in returns of over 10% per year. This is because of the size of the fund.

However, size does matter when it comes to making investments. For example, a fund of billions will have to invest in already established entities while a fund with tens of millions will invest in small, medium, and large enterprises that have a high rate of growth.

Just like the Allan Gray Stable Fund, investments are mostly in well-established companies. The Stable Fund has investments in Nespars, British tobacco, Standard Bank, and more.

Investments in already established companies tend to have steady growth and provide security. On the other hand investments in start-ups can yield exponential growth or yet close down in a few years.

The Stable Fund aims at favourable growth and returns without putting the capital at high risk. Note that you can still lose your money by investing in the Stable Fund. There are no guarantees that the markets will always be in the fund’s favour.

But working as an index, the fund can withstand some of the worst economic crises like that of the 2008 financial crisis and most 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 Equity17. 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.

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