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Local investing

Launching the Allan Gray Tax-Free Balanced Fund

At Allan Gray we aim to keep our product and fund range small, and only introduce new offerings if we believe they will benefit our clients. We are pleased to announce the launch of the Allan Gray Tax-Free Balanced Fund, which will be available for investment via our Allan Gray Tax-Free Investment Account on 1 February 2016.

The Allan Gray Tax-Free Investment Account

We recently launched the Allan Gray Tax-Free Investment Account, to allow clients to benefit from the legislation introduced by the government in March 2015. As a reminder, dividend withholding and capital gains tax are reduced to zero, and when you invest in tax-free investment (TFI) products there are no restrictions on withdrawals. Contribution limits are currently set at R30 000 per year and R500 000 over your lifetime. Regulation further requires that all tax-free investment options charge fixed fees

The Allan Gray Tax-Free Balanced Fund

While we disagree with the outright ban on performance fees in TFI products, we are keen for clients to have the option of investing in an Allan Gray unit trust. For this reason, we have created a new version of our flagship unit trust: the Allan Gray Tax-Free Balanced Fund. This will be an entirely separate, fixed fee unit trust and will only be available for investment via tax-free products.

The Tax-Free Balanced Fund is broadly the same as the Balanced Fund but charges a fixed fee instead of a performance-based fee. The two unit trusts will have the same mandate and investment objective and over time we expect that they will deliver broadly similar returns.

How much will it cost to invest in the Allan Gray Tax-Free Balanced Fund?

The investment management fee will be fixed on both the portions managed by Allan Gray and Orbis and will average out at a TER of approximately 1.57% including all investment management fees, trading costs, administration fees and VAT.

As discussed, investors will only be able to access the Tax-Free Balanced Fund through tax-free savings and investment accounts. If they use the newly created Allan Gray Tax-Free Investment Account, consistent with all of our other products, the administration fees that we charge will be based on the same tiered pricing structure of our other platform products and will be determined based on the total value of all of an investor’s local platform investments with us. There are no additional transaction fees and no penalties for withdrawing any portion of the investment value.

Have we abandoned our view on performance fees?

We remain committed to performance fees that are fair, symmetrical and based on the right benchmark. We believe that performance-based fees align the interests of the investment manager with those of the client, and encourage investment managers to outperform over the long term, rather than to focus on gathering assets.

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