The Allan Gray Optimal Fund aims to achieve long term returns which are higher than those which an investor could achieve by investing in money market investments, regardless of how the stock market is performing. The fund uses superior stock selection as part of its strategy but is also mandated to use exchange traded funds (ETFs) in order to hedge its position and reduce net equity exposure. The maximum equity exposure is set to 20% thus the fund’s returns are unlikely to be correlated with the stock market. The fund’s return is mainly dependant on the level of short term interest rates.
Seek positive returns irrespective of stock market performance
Seek diversification through investing in a fund that is uncorrelated with stocks and bonds
The Allan Gray Optimal Fund's benchmark is the return on call deposits (for amounts in excess of R5m) with FirstRand Bank Limited.
Strategy of Allan Gray Optimal Fund
The Allan Gray Optimal Fund invests mainly in hedged SA equities, but also has small exposure to net SA equities, property as well as money market and bank deposits. The selection of stocks is chosen through a meticulous research process and may differ from many of the other Allan Gray funds. This is largely due to the inclusion of derivatives contracts, which means the fund will more closely resemble the indices on which these are derived.