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 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
What is Allan Gray Australia Stable Allan Gray Australia Stable is an Managed Funds investment product that is benchmarked against ASX Index 200 Index and sits inside the Domestic Equity - Other 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 Stable has Assets Under Management of 317.18 M with a management fee of 0.26%, a performance fee of 20.00% and a buy/sell spread fee of 0.2%.
How has the investment product performed recently? The recent investment performance of the investment product shows that the Allan Gray Australia Stable has returned 0.96% in the last month. The previous three years have returned 5.02% annualised and 4.29% each year since inception, which is when the Allan Gray Australia Stable 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 Stable first started, the Sharpe ratio is NA with an annualised volatility of 4.29%. The maximum drawdown of the investment product in the last 12 months is -0.69% and -7.28% 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 Stable has a 12-month excess return when compared to the Domestic Equity - Other Index of -3.86% and -2.76% 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 Stable has produced Alpha over the Domestic Equity - Other 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 - Other Index category, you can click here for the Peer Investment Report.
What level of diversification will Allan Gray Australia Stable provide? Allan Gray Australia Stable has a correlation coefficient of 0.77 and a beta of 0.22 when compared to the Domestic Equity - Other 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 Stable and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Allan Gray Australia Stable with the ASX Index 200 Index? For a full quantitative report on Allan Gray Australia Stable compared to the ASX Index 200 Index, you can click here.
Can I sort and compare the Allan Gray Australia Stable to do my own analysis? To sort and compare the Allan Gray Australia Stable financial metrics, please refer to the table above.
Has the Allan Gray Australia Stable 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 Stable? If you or your self managed super fund would like to invest in the Allan Gray Australia Stable 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 Stable? If you would like to get in contact with the Allan Gray Australia Stable manager, please call +61 2 82248604.
Comments from SMSF Mates SMSF Mate does not receive commissions or kickbacks from the Allan Gray Australia Stable. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - June 30, 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.
Performance Commentary - March 31, 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.
Performance Commentary - December 31, 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.
Performance Commentary - September 30, 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.
Performance Commentary - June 30, 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.
Performance Commentary - March 31, 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.
Performance Commentary - June 30, 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.
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