It has been a reversal of fortunes for Allan Gray in the Alexforbes Large Manager Watch (LMW).

For the 10 years to the end of 2021, Allan Gray had underperformed its peers in the LMW, a survey of the 10 largest balanced fund managers in the country.

But in the three months to March 31 2022, Allan Gray was the top performer, as its segregated high equity balanced funds returned 2.3%. Only M&G Balanced also gave a positive return, of 0.4%.

After this surge Allan Gray is now above average over seven and 10 years. Its poorest ranking is over three years, in which it is 8th out of 10 with a 9.4% annualised return.

Allan Gray CIO Duncan Artus (pictured) said that from early 2018 to the end of 2021 Allan Gray’s underweight position in US equities had cost clients. ‘But the momentum in US shares is reversing with high commodity prices, inflation above 5% in the US since June 2021 and an overheating US economy.’

According to Alexforbes market data, the worst-performing asset class, in rands, for the quarter was global bonds, with the FTSE WGBI losing -14.4%, closely followed by global equities with the MSCI World Index down -13.1%.

Top performers were the FTSE/JSE Mid Cap Index, returning 6.9%, and the Swix All Share Index up 5.7%. The South African All Bond Index provided a respectable 1.9% return.

Global allocations
Allan Gray had a relatively low exposure to global equities. The Allan Gray Balanced fund, a good proxy to its segregated funds, had just 15.4% in pure global equity plus a further 4.9% currency hedged global equity. Coronation was more aggressive with 24.1% in (unhedged) global equity.

M&G also benefited from a relatively light 19.2% exposure to foreign equities.

The worst performer in the group was Stanlib, with a negative -3.2% return. The second worst was Coronation, sliding -1.5% over the quarter.

Stanlib head of investments Mark Lovett said that Stanlib has a quality/growth bias.

 This is particularly true in our global equity bloc run by Columbia Threadneedle, which was overweight in US technology shares.’

These were exactly the shares in which Allan Gray was underweight.

Stanlib had a more aggressive 24.7% exposure to foreign equities. Coronation CIO Karl Leinberger (pictured above) said that his firm’s relative performance would have been hurt as it had already trimmed position sizes in diversified miners, which continued to strengthen, such as Glencore and Anglo American.

‘Given their demanding valuations, there has been a reduction in the margin of safety,’ Leinberger said.

But he said Coronation remained a committed holder of technology share Prosus, at about 5% of the strategy. This hit Coronation in the short term as the share was down 39% in the quarter.

In the more meaningful rolling 12-month returns, M&G was the top performer with a 16.9% return, followed by Oasis with 16.11%. The worst performers were Stanlib with 8.05% and Foord Asset Management with 10.36%.