Transcription of Finance News Network Interview with Allan Gray Australia Opportunity Fund, Fund Manager Simon Mawhinney
Lelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me from the Allan Gray Australia Opportunity Fund is Fund Manager, Simon Mawhinney. Simon welcome to FNN.
Simon Mawhinney: Thank you for having me.
Lelde Smits: Could you start by outlining the mandate of the Fund?
Simon Mawhinney: It’s a very simple Fund. It begins with 100 per cent of the funds invested in cash and short term, term deposits. And then to the extent that we see extreme opportunities and value in the stock market, we invest up to 50 per cent of the Fund in shares listed in the stock market. And where there’s no value at all, 100 per cent of the Fund will be invested in cash.
Lelde Smits: And which investors would be most attracted to your style of investing?
Simon Mawhinney: It’s probably for a range of more risk adverse investors with a shorter term, say two year time horizon. The Fund should be significantly less volatile than a 100 per cent equity fund. And so those investors, who can’t stomach significant volatility, would be better placed in this Fund.
Lelde Smits: The Fund’s benchmark is the RBA cash rate. Could you outline your performance since inception and the factors which have driven performance more recently?
Simon Mawhinney: Since inception the Fund has outperformed the benchmark by a little more than four per cent per annum. And more recently the performance has been driven by investments in shares like Transfield Services Limited
(ASX:TSE), Alumina Limited
(ASX:AWC) and David Jones Limited
(ASX:DJS).
Lelde Smits: What is the Fund’s current allocation to cash and money markets versus equities, and how has this changed over the past year?
Simon Mawhinney: So roughly 75 per cent of the Fund is invested in cash currently, with the remaining 25 per cent invested in shares. It’s a bit below the average over the last 12 months, which has probably been more like 30 per cent and for the reason that share markets have gone up a lot. And now is probably the time to exercise more caution.
Lelde Smits: How does the Fund respond to volatility in the market and what is your approach to managing it?
Simon Mawhinney: Volatility is usually a good opportunity for this Fund in as far as it can invest patiently in stocks if they are depressed. We don’t specifically try and manage volatility. Inherently the Fund is not a volatile product and volatility is not really an issue for this Fund.
Lelde Smits: Finally Simon, where have you identified opportunities in the market and which sectors may be overlooked?
Simon Mawhinney: Stock markets have gone up a lot over the past three or four years, and so it’s probably time to be more patient and cognisant of the downside risks from here. But there are a few sectors which are heavily depressed. Gold equities is one, more recently oil and gas. Iron ore is becoming quite depressed and a host of other companies, who perform services to the mining industry, are quite depressed. And we see opportunity there.
Lelde Smits: Simon Mawhinney, thank you for the introduction to Allan Gray Australia Opportunity Fund.
Simon Mawhinney: Thank you very much.
Ends
