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SA’s Largest Unit Trust Turns 10

01 October 2009 Allan Gray

Outside of money market funds, the Allan Gray Balanced Fund is now the largest unit trust in the country with just over R28 billion in assets under management. The fund turns 10 years old tomorrow, 1st October.

Since inception, the Fund has achieved an annualised return of 21.7%. This means that an investment of R1 000 on 1 October 1999 at the opening unit price of R10 would have grown to R7 110 after fees and with distributions re-invested at the closing price of R48.80 on 28 September 2009. The same investment in the FTSE/JSE All Share Index (ALSI) would have achieved an annualised return of 17.7%, growing to R5 100 (before fees but with dividends re-invested), while the average fund in its sector (domestic prudential – variable equity) achieved an annualised return of 16.0% growing to R4 420.

Investing in the Allan Gray Balanced Fund gives investors exposure to the same equities as the company’s Equity Fund. In other words, investors access the firm’s best ideas. The Top 10 shares in the Balanced Fund’s portfolio largely mirror those in its out-performing Equity Fund, and are currently: SABMiller, MTN Group, Anglogold Ashanti, British American Tobacco, Sasol, Remgro, Sanlam, Harmony Gold, Compagnie Fin Richemont SA, and Standard Bank Group.

As an asset allocation fund, the Balanced Fund represents Allan Gray’s views on the markets and, as such is the company’s flagship ‘house-view’ fund. Allan Gray approaches asset allocation on a bottom-up basis, which links the asset allocation process to the stock selection process, focusing on identifying good quality assets that are priced below their intrinsic value.

“To the extent that the investment team can find attractively priced equities trading at a discount to their intrinsic value, so will the portfolio have a higher exposure to equities, staying within the maximum limit of 75% of the portfolio as allowed for this category of fund,” says Jeanette Marais, Allan Gray’s deputy director of distribution and client service.

The investment team has been reducing the percentage of equities in the fund of late. Its net exposure to SA equities was down to 53% at the end of August, and its net equity exposure, taking into account offshore equities as well, was 67%. “The strength of the rand continues to surprise us, but the team is making use of the opportunity to top-up the Fund’s foreign exposure to its maximum 20% limit,” says Marais.

Like equity funds, balanced funds are wealth-creation, as opposed to wealth-preservation funds, but without the same level of risk as pure equity funds.

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