Allan Gray Australia Equity Fund’s investment approach is to buy securities that offer long-term value, that are currently unpopular with the general investment community or are not well known. Allan Gray will not buy a security simply because it is in the Benchmark. Similarly, Allan Gray will buy significant positions in securities that are not in the Benchmark if they offer outstanding value, based on our bottom-up, fundamental valuation of the opportunity.
Past performance is not indicative of future performance. Returns shown are net of fees and assume reinvestment of distributions. Returns are annualised for periods of one year and over. Annualised returns show the average amount earned on an investment in the relevant Class each year over the given time period. Actual investor performance may differ as a result of the investment date, the date of reinvestment of income distributions, and withholding tax applied to income distributions.
The highest and lowest returns earned during any calendar year since the launch of each Class are shown to demonstrate the variability of returns. The complete return history for each Class can be obtained by contacting our Client Services team.
What is Allan Gray Australia Equity A Allan Gray Australia Equity A is an Managed Funds investment product that is benchmarked against ASX Index 200 Index and sits inside the Domestic Equity - Large Value Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Allan Gray Australia Equity A has Assets Under Management of 1.99 BN with a management fee of 0.77%, a performance fee of 20.00% and a buy/sell spread fee of 0.4%.
How has the investment product performed recently? The recent investment performance of the investment product shows that the Allan Gray Australia Equity A has returned 3.64% in the last month. The previous three years have returned 10.73% annualised and 17.43% each year since inception, which is when the Allan Gray Australia Equity A first started.
How is risk measured in this investment product? There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Allan Gray Australia Equity A first started, the Sharpe ratio is NA with an annualised volatility of 17.43%. The maximum drawdown of the investment product in the last 12 months is -5.08% and -56.32% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.
What is the relative performance of the investment product? Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Allan Gray Australia Equity A has a 12-month excess return when compared to the Domestic Equity - Large Value Index of 1.5% and 1.64% since inception.
Does the investment product produce Alpha over its Peers? Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Allan Gray Australia Equity A has produced Alpha over the Domestic Equity - Large Value Index of NA% in the last 12 months and NA% since inception.
What are similar investment products? For a full list of investment products in the Domestic Equity - Large Value Index category, you can click here for the Peer Investment Report.
What level of diversification will Allan Gray Australia Equity A provide? Allan Gray Australia Equity A has a correlation coefficient of 0.91 and a beta of 0.96 when compared to the Domestic Equity - Large Value Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.
How do I compare the investment product with its peers? For a full quantitative report on Allan Gray Australia Equity A and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Allan Gray Australia Equity A with the ASX Index 200 Index? For a full quantitative report on Allan Gray Australia Equity A compared to the ASX Index 200 Index, you can click here.
Can I sort and compare the Allan Gray Australia Equity A to do my own analysis? To sort and compare the Allan Gray Australia Equity A financial metrics, please refer to the table above.
Has the Allan Gray Australia Equity A been independently verified by SMSF Mate? This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.
How can I invest in Allan Gray Australia Equity A? If you or your self managed super fund would like to invest in the Allan Gray Australia Equity A please contact Level 2, Challis House, 4-10 Martin Place, Sydney NSW 2000 via phone +61 2 82248604 or via email clientservices@allangray.com.au.
How do I get in contact with the Allan Gray Australia Equity A? If you would like to get in contact with the Allan Gray Australia Equity A manager, please call +61 2 82248604.
Comments from SMSF Mates SMSF Mate does not receive commissions or kickbacks from the Allan Gray Australia Equity A. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - June 30, 2023 It is unclear if we are on the cusp of a deep or protracted cyclical downturn. What is clearer though, is that if a recession is imminent, it is likely to be one of the world’s most telegraphed recessions yet. Share markets are forward looking so we consider that these expectations have already been factored into share prices, at least to some degree.
Over recent months, equity investors have gravitated to the perceived safety of large companies at the expense of ‘riskier’ smaller companies. Graph 1 illustrates this. It plots the performance of the S&P/ASX 100 Index (the largest 100 companies listed in Australia) and the S&P/ASX Small Ordinaries Index (the next 200 largest companies listed in Australia). The Small Ordinaries Index is now at its lowest point relative to the ASX 100 Index since April 2000 when the Small Ordinaries Index first launched.
While the Allan Gray Australia Equity strategy does own some large companies, it has a significant skew towards medium-sized and smaller companies (see Table 1). It is here that we think the greatest upside potential exists. Lendlease is one such mediumsized company. If it’s true that good investments often begin with an element of discomfort, then Lendlease would fit the bill.
Performance Commentary - March 31, 2023 The Australian share market rose during the March quarter, albeit with some fluctuation, with the S&P/ASX 300 Accumulation Index finishing up 3.3%. Strong gains in January gave way to a weaker finish, as the index fell in both February and March. The Allan Gray Australia Equity Fund (Class A) was up 2.0% this quarter, underperforming the benchmark. It is worth noting that most of the underperformance came in the rising market of January. The Fund actually outperformed the benchmark from the end of January to the end of March, as shown in Graph 1.
Financials stocks were overall neutral for relative returns for the Fund for the quarter. Financials was the market’s weakest performing sector, so the Fund’s underweight position was beneficial. Looking at individual stocks, Virgin Money UK was the largest detractor for the Fund for the quarter. This came during a period of negative news and sentiment toward specific overseas financial companies.
Virgin Money trades at around 33% of net tangible assets, despite making high single digit returns on tangible equity. It is also well-capitalised. We believe Virgin is priced more moderately compared to other Australian-listed banks. We maintain the position and added to it on recent weakness.
Other Financials holdings include AMP, Westpac and ANZ, which were detractors for the quarter, and QBE which was a strong positive contributor for the quarter. The Fund added a new insurance company holding during the quarter in Insurance Australia Group (IAG). Potential risks for IAG include reliance on reinsurers, possible claims growth and cyclicality of commercial business. We believe the price reflects investor uncertainty, allowing investment at a reasonable valuation.
Lastly in Financials, Challenger was a detractor for the quarter. However, it has been a strong positive contributor to relative performance over the last one, three and five years, and as such we had significantly reduced the position on share price strength over that time, in late-2022 and early-2023. Consequently, the residual position is a relatively smaller weight in the Fund today.
Performance Commentary - December 31, 2022 The Australian share market rose strongly during the December quarter, with the S&P/ASX 300 Accumulation Index up 9.1%. The quarterly number masks the fact that gains earlier in the quarter gave way to a weaker finish (the S&P/ASX 300 Accumulation Index was down 3.3% for the month of December). The Allan Gray Australia Equity Fund (Class A) was up 13.8% this quarter, outperforming the benchmark.
Graph 4 shows the Equity Fund’s performance over one month, three months and 12 months versus the benchmark. If you invest in the same shares as the majority of investors at the same time, it is by definition almost impossible to outperform the market. As the following graphs demonstrate, the Equity Fund maintains a very different position to the index weightings, and with good reason. Unfortunately, being positioned differently does not guarantee outperformance – only ‘different’ performance. Our conviction is based upon our fundamental research and today we believe extreme differences in valuation remain across the share market between shares that we assess as undervalued, and those that we assessed as overvalued.
Our approach is to position the Equity Fund in the most undervalued shares versus our assessment of long-term value. We believe this not only maximises the opportunity for long-term outperformance, but also best mitigates the risk of permanent loss of capital, which stems from overpaying.
Performance Commentary - September 30, 2022 Past performance is not necessarily an indicator of future performance.
The benchmark is the S&P/ASX 300 Accumulation Index. All performance returns shown are net of fees and assume reinvestment of distributions. Returns are annualised for periods of one year and over. Annualised returns show the average amount earned on an investment in the Class each year over the given period. Actual investor performance may differ as a result of the investment date, the date of reinvestment of income distributions, and withholding tax applied to income distributions.
Performance Commentary - June 30, 2022 The Australian share market fell during the June quarter, with the S&P/ASX 300 Accumulation Index down 12.2%. The Allan Gray Australia Equity Fund Class A was also down this quarter, by 12.7%, moderately underperforming the benchmark.
During the quarter, positioning in the Energy sector was the largest positive contributor, followed by some share-specific holdings in the Financials sector. Woodside Energy Group, Worley and Santos were leading contributors within the Energy sector. Origin Energy also contributed positively, though it is officially categorised within the Utilities sector.
Within the Financials sector, QBE Insurance Group, Challenger and AMP all contributed positively to relative returns. Challenger and AMP in particular outperformed the broader Financials sector.
Despite recent performance, we believe many of these names remain attractive versus the broader market, and so retain meaningful positions within the Fund. We have, however, trimmed all these positions other than AMP.
Positive contribution by the above-mentioned names was offset primarily by underperformance within our selected Materials holdings. In particular, the main detractors included Sims, Alumina and Newcrest Mining. We still see significant value in these companies for the Fund and added to positions in Alumina and Sims during the quarter.
Performance Commentary - March 31, 2022 The Australian sharemarket rose during the March quarter, with the S&P/ASX 300 Accumulation Index returning 2.1%. The Allan Gray Australia Equity Fund outperformed strongly, returning 13.7% during the same period, outperforming its S&P/ASX 300 Accumulation Index benchmark by 11.6%. It was a particularly strong quarter for the Equity Fund, during a particularly volatile period for the market, demonstrating the diversification benefits of a contrarian investment approach.
During the quarter, positioning in the Energy sector was the largest positive contributor, followed by some stock-specific holdings in the Materials sector. Within these, Woodside, Santos, Sims, Incitec Pivot, Nufarm, Alumina and South32 were leading contributors. Origin Energy also contributed strongly, although it is officially categorised within the Utilities sector.
Performance Commentary - December 31, 2021 The Australian sharemarket had a positive quarter to 31 December, with the S&P/ASX 300 Accumulation Index up 2.2%. The Allan Gray Australia Equity Fund (Class A) returned 0.9% during the same period, underperforming its S&P/ASX 300 Accumulation Index benchmark by 1.3%.
On a monthly basis, the Fund outperformed its benchmark in October, with all of the quarterly underperformance coming in November. In December the Fund recouped some of this as it moved back into strong outperformance for the last month of the year.
During the quarter, positioning in the Energy sector was the largest detractor, followed by some share-specific holdings in the Materials sector. Within those, Alumina, Woodside Petroleum and Oil Search were leading detractors. It was far from one-way traffic however, as positive contribution to relative performance came from Sims, Incitec Pivot, Newcrest Mining, South32, and Worley.
Within the Energy sector, we believe significant undervaluation remains, so we continue to hold meaningful positions here. We also added further to engineering services company, Worley, during the quarter. The shares held in Oil Search were exchanged into Santos shares in December, following the previously announced merger. The Financials sector was mixed, with outperformance from NAB partially offsetting underperformance from Westpac.
Within Financials, the banks have performed strongly over the last year and we lightened exposure a little further during the quarter. However, the reduction in exposure came from the strongly outperforming NAB and we shifted some of this into Westpac on relative weakness.
Elsewhere, strong positive contribution to relative performance came from Metcash in the Consumer Staples sector and we reduced this position meaningfully at higher prices. The absence of exposure to Information Technology and Healthcare both also aided relative performance, as those sectors underperformed.
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