Orbis, Allan Gray’s offshore investment partner, has launched its Global Cautious Fund in South Africa. This global low-equity, multi-asset fund aims to meet the needs of investors looking for a cautious balance between investment returns and risk of loss.
Most importantly, it is well positioned to benefit from multiple market conditions, says Nshalati Hlungwane, manager at Allan Gray.
“In South Africa, there has been increased demand for multi-asset funds that deliver US dollar returns with lower equity exposure and reduced volatility,” says Hlungwane.
She explains that while inflation has been topical over the recent past, it is now overshadowed by growth concerns, given the impact of the higher interest rate environment.
There is also the additional layer of broader political events, such as the US elections in November, which have global implications.
“The Global Cautious Fund has built in flexibility to deal with environments like those of today, that are characterised by uncertainty and many moving parts,” says Hlungwane.
Like its “older sibling”, the Orbis Global Balanced Fund, launched in 2013, Global Cautious aims to balance capital appreciation, income generation and risk by investing directly in a diversified global portfolio of equities, fixed income and commodity-linked securities.
“Exposure to riskier assets will be materially lower through the cycle and therefore suitable for more risk-averse investors,” says Hlungwane.
Positioned to deliver in different market conditions
The fund has been designed to allow for flexibility in its asset-class exposure parameters. For instance, it can have a minimum exposure of 10% to equities or as much as 60%. Similarly, exposure to fixed-income assets can be as low as 30% or as high as 90%. “This helps ensure that Orbis delivers on its mandate over the long term and in different kinds of market environments,” she comments. “In addition to having exposure to equities and fixed income, the fund has the ability to invest in commodity-linked instruments. It can also adjust its equity and currency exposures using hedging.”
According to Hlungwane, the Global Cautious Fund has navigated a volatile international market environment in the past five years, earning 5.3% versus 2.2% for its peer group and ahead of its benchmark’s 4.6%.
“The fund’s current positioning reflects how Orbis takes different views to the broader market and peers. It is currently invested in cash, hedged equity, gold-related securities, US Treasury Inflation Protected Securities and selected corporate bonds to protect clients’ capital.”
Regarding equities, Orbis currently prefers the UK, Europe and Japan to the US. “The fund is currently invested in energy, semiconductor manufacturers, energy transition businesses, financials and defence contractors, with minimal exposure to the US tech juggernauts,” she says.
Going forward, Hlungwane believes Orbis Global Cautious is well positioned to benefit from multiple economic scenarios. “For many investors who are nervous about where the market may head and have a lower risk tolerance, Cautious can be a useful addition to their portfolios,” she notes.
“While it is unclear what markets will do over the next decade, Orbis continues to focus on finding securities which trade at a discount to intrinsic value and building a portfolio which cautiously balances investment return and risk of loss.”
Interested investors can access the Orbis Global Cautious Fund via the Allan Gray Offshore Investment Platform.
Get the latest issue of FAnews