Strong rand undermines offshore investing

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ALLAN GRAY-ORBIS GLOBAL EQUITY FEEDER FUND

  • Raging Bull award for the Best Foreign (South African-domiciled) Equity Fund – the top performing fund on straight performance in the foreign equity general sub-category over three years to December 31, 2010.
  • Certificate for the Best Foreign Equity General Fund on a risk-adjusted basis over five years.

The Allan Gray-Orbis Global Equity Feeder Fund pulled a hat-trick this year, winning the Raging Bull Award for the Best Foreign (South African-domiciled) Equity Fund for the third year in a row, despite a poor performance last year. According to ProfileData, the fund earned a negative 2% a year over the last three years, against its benchmark, the MSCI World Index, which returned a negative 7.92% a year over the three years to the end of December last year. Due to the strong rand, most funds investing in offshore markets showed negative returns over this period. The Equity Feeder Fund, which was launched in April 2005, accepts investments in rands and feeds them into the Orbis Global Equity Fund. This means you can enjoy the benefits of  foreign market exposure without having to use your offshore allowance. Orbis was founded in 1990 by Allan Gray using a similar investment philosophy to his South African company, Allan Gray. Chris du Toit, an analyst at Allan Gray who is involved in Orbis client service in South Africa, says the fund performed well in 2009, with good performances from technology stocks such as Google and Microsoft. “But in 2010, there were poor stock choices, such as Research in Motion (RIM), which makes Blackberry phones. RIM stock has not performed well amid concerns that Apple is poised to blow RIM out of the smartphone market,” he says. Looking ahead, the fund is invested 2.7% in NRG Energy, a natural gas company based in the United States, Du Toit says. He says natural gas prices are currently at a seven-year low in the US. However, drilling is not economical at current prices and as drilling is delayed and supply becomes constrained, gas prices should eventually rise.  “So we believe that NRG stock will benefit from higher natural gas prices over the long term,” Du Toit says. The minimum investment amounts for the Allan Gray-Orbis Equity Feeder Fund are R500 a month or a lump sum of R20 000.

  • This article was first published in Personal Finance newspaper on 29 January 2011.

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