September, 2023
The Fund aims to provide a long-term return that exceeds the Reserve Bank of Australia cash rate, with less volatility than the Australian sharemarket.
Investors with a two-year or longer investment horizon who are looking to potentially outperform cash over the long term with less risk than investing in the sharemarket alone. The Fund holds at least 50% in cash and money market instruments. When the opportunity arises, the remainder is invested in selected ASX securities.
• Management fees and costs – 0.26% per annum of the Fund’s NAV.
• Performance fee – 20.5% of the Fund’s outperformance, net of the base fee, in comparison to the Benchmark. A performance fee is only payable where the Fund’s outperformance exceeds the high-water mark, which represents the highest level of outperformance, net of base fees, since the Fund’s inception
June, 2023
The Australian sharemarket rebounded strongly in the June quarter, with the S&P/ASX 300 Accumulation Index gaining 16.8%. The Allan Gray Australia Equity Fund (Class A) outperformed its S&P/ASX 300 Index benchmark by 1.5% during the quarter.
The June quarter saw some reversal in trends that have been a headwind to our portfolio previously. Notably, strength in the Energy sector made our overweight position in Energy a strong positive for relative performance. Within that sector, Oil Search Limited was the largest contributor at the stock level.
The quarter also saw weaker relative performance for the Healthcare sector. Consequently, the absence of Healthcare exposure in the Fund was another significant positive. Exposure to Financials was positive overall for relative performance, with a meaningful position in AMP Limited being the largest positive driver at a stock level within the Financials sector.
The worst performing sector for the Fund was Consumer Staples, due to the holding in Metcash Limited. We had reduced exposure to this stock on the extreme strength of the first quarter and we remain comfortable with the current holding.
Performance from the Materials sector was negative overall, with Nufarm Limited, Incitec Pivot Limited and Alumina Limited all detracting from relative performance. But it was not entirely one-sided. Our largest holding in the sector, Newcrest Mining Limited, was also the largest positive contributor of all stocks held in the portfolio.
Cyclically-exposed sectors and companies remain key positions in the Fund currently. Notwithstanding some bright spots this quarter, it is our opinion that they still offer significantly greater value and price upside than the more stable earners (staples, utilities, healthcare) and disruptors (technology companies) which appear to trade at blue-sky valuations. Our portfolio remains firmly skewed away from healthcare, staples and technology, having used recent strength to sell almost entirely the positions we had in those sectors (such as Coles and Telstra) and invest the proceeds in a number of, in our opinion, very cheap but cyclically-exposed companies currently experiencing earnings headwinds.
Allan Gray Australia Balanced Fund The Allan Gray Australia Balanced Fund outperformed its composite benchmark by 1.7% for the June quarter.
The Fund had 70% in shares at quarter end, although about 7% of the global share exposure is reduced through the use of exchange-traded derivatives which allows for some protection in those periods when market indices fall. The Fund has been overweight global shares versus global fixed income. This contributed strongly to relative performance for the quarter, as global shares outperformed fixed income. In addition, stock selection in both the Australian and global shares further bolstered relative returns.
The Fund, on average, held 25% in fixed income securities and cash during the quarter. This has remained significantly shorter in duration than the benchmark – at one year versus eight for the benchmark. This had limited impact on the Fund for the June quarter, with government bond yields fairly flat, on average, during the quarter. The Fund remains more defensively positioned than the benchmark in terms of both relative and absolute returns, in the event interest rates rise.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/Fund-Commentary-Quarterly-Review-June-20-_-Allan-Gray-Australia.pdfMarch, 2023
The Allan Gray Australia Stable Fund (Fund) aims to provide a long-term return that exceeds the Reserve Bank of Australia cash rate, with less volatility than the Australian sharemarket. The Fund invests a minimum of 50% in cash and money market instruments such as term deposits. When the opportunity arises, the remainder is invested in carefully selected Australian securities using our contrarian investment philosophy. When Allan Gray believes share markets offer compelling long-term value, up to 50% of the Fund’s total assets may be held in Australian listed securities. The Fund may experience some fluctuations or volatility in pursuing its objective, given its exposure to ASX-listed securities, especially if the sharemarket declines beyond its normal range.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/Allan-Gray-Australia-Stable-Fund-Fact-Sheet_March-2023.pdfDecember, 2022
The Allan Gray Australia Stable Fund returned 4.5% for the quarter, outperforming its cash rate benchmark – which returned 0.7% for the quarter.
The Stable Fund has outperformed the cash rate benchmark each month of the last quarter, including December, when the broad Australian S&P/ASX 300 Accumulation Index fell 3.3%.
This has further added to the Fund’s asymmetric return profile since inception (greater participation in equity market upside than downside, on average).
The Fund increased equity exposure slightly during the last quarter. This was the combined result of active buying in some shares assessed as attractive at depressed prices, and positive market movement in others. We have trimmed some of those holdings where strong performance has brought them closer toward fair value.
As at the end of December, the Fund had 27.1% invested in ASX-listed securities. The remaining c.73% is held in cash and money market investments. This can be seen in Graph 7, which shows our allocation between cash and ASX-listed securities over time.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/QuarterlyCommentary-5.pdfSeptember, 2022
The Allan Gray Australia Stable Fund returned -0.5% for the quarter, underperforming its Reserve Bank of Australia cash rate benchmark, which returned 0.4% for the quarter.
The Fund has been reducing equity exposure for some time now and continued to do so during the last quarter. This has held the Fund in good stead during recent volatility. Nevertheless, the pronounced weakness of equities contributed to underperformance in the most recent quarter. We continue to manage exposures to what we believe is a prudent level and to hold allocations to what we see as the most attractively valued shares identified by our research.
In terms of assessing the Fund’s potential upside versus downside outcomes, there are various ways to do this. One simple method is to compare how the Fund has performed in rising sharemarkets versus falling markets. Since inception of the Stable Fund over 11 years ago, the S&P/ASX 300 Index has risen in 89 of 135 months, falling in the other 46 months. During the ‘up’ months, the broad sharemarket achieved average returns of 2.9%, while the Allan Gray Australia Stable Fund averaged 0.9%. On the other hand, during the ‘down’ months, the broad sharemarket averaged -3.5%. Meanwhile during those same down months, the Fund averaged -0.5%.
This means the Stable Fund has, since inception, participated in 33% of the sharemarket upside, with only 13% of the downside – as shown in Graph 2. We believe this asymmetric payoff is in keeping with our fundamental, contrarian approach and may be of significant benefit to investors seeking to outperform cash using an investment allocation of more moderate risk and return.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/QuarterlyCommentary-4.pdfJune, 2022
The Australian sharemarket rebounded strongly in the June quarter, with the S&P/ASX 300 Accumulation Index gaining 16.8%. The Allan Gray Australia Equity Fund (Class A) outperformed its S&P/ASX 300 Index benchmark by 1.5% during the quarter.
The June quarter saw some reversal in trends that have been a headwind to our portfolio previously. Notably, strength in the Energy sector made our overweight position in Energy a strong positive for relative performance. Within that sector, Oil Search Limited was the largest contributor at the stock level.
The quarter also saw weaker relative performance for the Healthcare sector. Consequently, the absence of Healthcare exposure in the Fund was another significant positive. Exposure to Financials was positive overall for relative performance, with a meaningful position in AMP Limited being the largest positive driver at a stock level within the Financials sector.
File: https://commentary.quantreports.net/wp-content/uploads/2020/10/AEF.jpgMarch, 2022
The Allan Gray Australia Stable Fund returned 4.4% for the quarter, meaningfully outperforming its cash rate benchmark – which effectively returned zero for the quarter.
The Fund had been gradually lightening its ASX-listed securities (primarily equities) exposure for some time leading into the last quarter, as the market had continued to rise. This held the Fund in good stead during a volatile last quarter. Nevertheless, the selected securities held performed well overall and contributed to the strong outperformance. Even with this strong outperformance, we continue to manage exposures to what we believe is a prudent level.
As at the end of March, the Fund had around 31% invested in ASX-listed securities (of which around 28.5% was equities and about 2.6% selected hybrid securities). The remaining 69% is held in cash and money market investments. This can be seen in Graph 1, which shows our allocation between cash and ASX-listed securities over time.
File:June, 2021
The Allan Gray Australia Stable Fund outperformed its cash rate benchmark by 4.9% in the June quarter.
The performance of the Stable Fund is driven by the performance of our favoured Australian share holdings and the decision on how much is invested in shares versus cash. The Fund benefited from having built increased exposure to shares during the weakness of the first quarter, and this continued to increase selectively during the second quarter.
As at the end of June, the Fund had around 30% invested in shares, with the remainder in cash and money market investments. This can be seen in the graph below, which shows our allocation between cash and shares over time.
The broad Australian sharemarket is still some way from its previous high. However, the market average fails to highlight that some popular stocks and sectors are priced at levels that in our view are far too optimistic. We therefore remain focused on avoiding those areas and the risks that come with excessive valuation. Instead, the shares held in the Fund will be those we have assessed as most attractively priced and where risk of permanent capital loss is low.
File:April, 2021
The Australian sharemarket had a decent quarter, with the S&P/ ASX 300 Accumulation Index up 4.2%. The Allan Gray Australia Equity Fund (Class A) returned 7.6% during the same period, outperforming its S&P/ASX 300 benchmark by 3.4%.
In a continuation from the prior quarter, the Fund’s overweight position in the Materials sector was the largest positive contributor to relative returns from a sector perspective. But this exposure has been very different from the benchmark, with the most positively contributing holdings including Incitec Pivot, Nufarm and Sims.
File:December, 2020
The Allan Gray Australia Stable Fund delivered 7.2% for the December quarter, outperforming its cash rate benchmark, which delivered just above 0%.
The performance of the Stable Fund is driven by the performance of our favoured Australian share holdings and the decision on how much is invested in shares versus cash. Having added to share exposure during the weakness of the prior quarter, the Fund took advantage of the strength of the December quarter to lighten many positions. One exception to this was Newcrest Mining, to which we added on relative weakness.
As at the end of December, the Fund had around 36% invested in shares, with the remainder in cash and money market investments. (This can be seen in the graph below, which shows our allocation between cash and equities over time.).
The overall recovery in the sharemarket during the last quarter fails to highlight the significant divergence that has built up over time between different categories of stocks. Some popular stocks and sectors are priced at levels that in our view are far too optimistic. We therefore remain focused on avoiding those areas and the risks that come with excessive valuation. Instead, the shares held in the Fund will be those we have assessed as most attractively priced, and where we believe the risk of permanent capital loss is low.
File:September, 2020
The Allan Gray Australia Stable Fund underperformed its cash rate benchmark by 1.7% for the September quarter.
The performance of the Stable Fund is driven by the performance of our favoured Australian share holdings and the decision on how much is invested in shares versus cash. Having added to share exposure earlier in the year, the Fund took advantage of weakness during the September quarter to add selectively to shares assessed as offering great value.
As at the end of September, the Fund had around 31% invested in shares, with the remainder in cash and money market investments. This can be seen in the graph below, which shows the Fund’s allocation to shares over time.
The broad Australian sharemarket remains some way from its previous high. However, the market average fails to highlight that some popular stocks and sectors are priced at levels that in our view are far too optimistic. We therefore remain focused on avoiding those areas and the risks that come with excessive valuation. Instead, the shares held in the Fund will be those that we have assessed as most attractively priced and where risk of permanent capital loss is low.
File:June, 2020
The Allan Gray Australia Stable Fund outperformed its cash rate benchmark by 4.9% in the June quarter.
The performance of the Stable Fund is driven by the performance of our favoured Australian share holdings and the decision on how much is invested in shares versus cash. The Fund benefited from having built increased exposure to shares during the weakness of the first quarter, and this continued to increase selectively during the second quarter.
As at the end of June, the Fund had around 30% invested in shares, with the remainder in cash and money market investments. This can be seen in the graph below, which shows our allocation between cash and shares over time.
The broad Australian sharemarket is still some way from its previous high. However, the market average fails to highlight that some popular stocks and sectors are priced at levels that in our view are far too optimistic. We therefore remain focused on avoiding those areas and the risks that come with excessive valuation. Instead, the shares held in the Fund will be those we have assessed as most attractively priced and where risk of permanent capital loss is low.
File:ticker: ETL0273AU
commentary_block: Array
factsheet_url:
QUARTERLY COMMENTARY
https://www.allangray.com.au/b/latestinsights/
https://www.allangray.com.au/b/fund-commentary-quarter-in-review-june-2020/
release_schedule:
fund_features:
Allan Gray Australia Stable Fund aims to provide a long-term return that exceeds the Benchmark, with less volatility than the Australian sharemarket.
- The Fund’s default position will be investments in cash and money market instrument issued by, or with, entities that have at least an investment grade credit rating issued by Standard & Poor’s or Moody’s, such as Australian banks.
- The only time the Fund will not invest in such cash and money market instruments is if Allan Gray identifies an investment opportunity that offers long-term value. Such investments can only comprise up to 50% of the Fund’s net asset value at any one time.
manager_contact_details: Array
asset_class: Domestic Equity
asset_category: Australia Other
peer_benchmark: Domestic Equity - Other Index
broad_market_index: ASX Index 200 Index
structure: Managed Fund