Allan Gray Australia Opportunity Fund – investments and portfolio tilts

Funds Management

by Carolyn Herbert

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Transcription of Finance News Network Interview with Allan Gray Australia Opportunity Fund Investment Analyst, Dan Abeshouse
Natalie MacDonald: The Allan Gray Australia Opportunity Fund aims to provide investors with long-term returns that exceed the RBA cash rate, but with less volatility than the Australian share market. I’m Natalie MacDonald for the Finance News Network. Joining me now is Allan Gray Australia Opportunity Fund analyst, Dan Abeshouse. Dan, welcome back to FNN.
Dan Abeshouse: Thanks very much Natalie, glad to be here.
Natalie MacDonald: Can you start then by introducing the Fund?
Dan Abeshouse: Allan Gray Australia manages about $3 billion on behalf of our clients. And the Allan Gray Australia Opportunity Fund is a fund that invests in cash and ASX listed companies, with a minimum of 50 per cent cash at all times, up to 100 per cent, depending on the opportunities that we see in the share market. And the idea is that it’ll have less volatility, than a fund that’s fully invested in shares, which may suit people who are closer to retirement. Who are looking for a better return than cash, but without the volatility and short-term risk that the share market might present.
Natalie MacDonald: What is the Fund’s current allocation to cash and equities, and how has this changed over the course of 2015?
Dan Abeshouse: The Allan Gray Australia Opportunity Fund currently has about 30 per cent of its funds, invested in shares. And the remaining 70 per cent, in cash and term deposits with the big four banks. And the reason we’re at those levels at the moment is that there are some interesting opportunities. But we’re not at our 50 per cent level, because we don’t think that the market is completely depressed. We’re not at zero, because we don’t think the market is completely overvalued.
And the shares that we’re interested in at the moment tend to be, as with our Equity Fund, shares that are out of favour. And often those are the ones that present interesting long-term opportunities. At the moment that means companies like Woodside Petroleum Limited (ASX:WPL), Origin Energy Limited (ASX:ORG) and Metcash Limited (ASX:MTS).
Natalie MacDonald: The Fund’s allocation to equities has been increasing recently. Do you expect to continue to increase that allocation over the coming year?
Dan Abeshouse: It’s always hard to say and it really depends on what the market does. If the market turns down for some reason, and very interesting and attractive opportunities present themselves, then we would expect to increase our exposure to shares. But it really is dependent on the circumstances as they present themselves.
Natalie MacDonald: What is the longer-term performance track record?
Dan Abeshouse: The Opportunity Fund has been offered in Australia since 2011. And since that time, the Fund net of fees has produced about a six per cent return, versus the benchmark, which is the RBA cash rate they’ve returned since that time, is three per cent. So that’s a three per cent outperformance of that benchmark, since the Fund was offered in Australia.
Natalie MacDonald: Lastly then Dan. Who is the Fund suited to, who should invest in this Fund?
Dan Abeshouse: The Opportunity Fund is suited for people who would like a better return than cash, but don’t want the volatility of being fully invested in the share market. And so the combination of cash and shares, we hope over time, will provide a superior return to cash. And our targeted investments in equities that we pick, will hopefully provide a better return than the share market overall, for that portion of the Fund.
Natalie MacDonald: Dan Abeshouse, many thanks for the update.
Dan Abeshouse: Thanks very much Natalie.