There is currently a ballot underway for the Allan Gray-Orbis Global Fund of Funds (“the Fund”) which proposes changes to the Fund’s structure, name and benchmark. The intention is to convert the Fund from a fund of funds structure to a feeder fund structure that will invest solely in the Orbis SICAV Global Balanced Fund. The Fund will therefore be renamed to the Allan Gray-Orbis Global Balanced Feeder Fund. Investors in the Fund will receive a ballot letter (detailed below and available for download here) and have the opportunity to vote on the proposed changes. If the ballot is successful, our goal is to implement the changes with effect from 1 June 2021. Please click here to download the ballot form if you are an investor in the Fund.
Proposed changes to the Allan Gray-Orbis Global Fund of Funds
As an investor in the Allan Gray-Orbis Global Fund of Funds (“the Fund”), we invite you to consider and vote on proposed changes to the Fund. We intend to convert the Fund from a fund of funds structure to a feeder fund structure that invests solely in the Orbis SICAV Global Balanced Fund, which is domiciled in Luxembourg and managed by Orbis Investment Management Limited (“Orbis”), our offshore investment partner. At the same time, we intend to:
- Rename the Fund, since it will become a feeder fund
- Change the Fund’s benchmark to be aligned with that of the underlying Orbis SICAV Global Balanced Fund
If the ballot is successful, our goal is to implement these changes with effect from 1 June 2021. The transition to fully invest in the Orbis SICAV Global Balanced Fund will be managed over a maximum period of four weeks after 1 June 2021.
What do you need to do?
- Once you have considered the proposed changes detailed below, please complete the ballot form and return it directly to our auditors before midnight on 26 April 2021. You may submit your ballot response by email to allangrayballots@za.ey.com, or use the enclosed self-addressed envelope.
- Please do not include any other instructions regarding your investment with your ballot form as the ballots go straight to the auditors and your instruction will not reach us.
- If you are no longer invested in the Fund on or before 1 March 2021, you do not have to do anything.
The proposed changes will only be implemented if our auditors receive completed ballot forms for at least 25% of the Fund’s units, as required by legislation, with the majority of the votes received being in favour of the changes.
Your rights as an investor
As outlined in section 98 of the Collective Investment Schemes Control Act (CISCA) and clause 67 of the Trust Deed between Allan Gray Unit Trust Management (RF) Proprietary Limited and its Trustee, FirstRand Bank Limited, you have the right to vote for or against the below changes. Regardless of the outcome of the vote, you are able to switch (at no switching fee) or withdraw your investment from the Fund. Please note, however, that this may constitute a capital gains tax event. If you do not switch or withdraw your investment from the Fund, the proposed changes will automatically apply to your investment if they are approved.
The proposed changes and their impact on your investment
1. Convert the Fund from a fund of funds structure to a feeder fund structure and amend the Fund’s investment policy accordingly
While the Fund’s structure will change, its investment objective and investment philosophy will remain the same.
The Fund is a rand-denominated unit trust that was launched in 2004. Currently, the Fund invests in a mix of equity, absolute return and multi-asset class funds managed by Orbis. Allan Gray currently determines the mix of Orbis funds that the Fund invests in to achieve its objective.
Since the launch of the Orbis SICAV Global Balanced Fund in 2013, the Fund has gradually increased its exposure to the Orbis SICAV Global Balanced Fund, with it now making up approximately 74% of the Fund. Going forward, Allan Gray intends to invest the Fund solely in the Orbis SICAV Global Balanced Fund, which we believe is appropriate given that the Orbis SICAV Global Balanced Fund’s investment objective mirrors that of the Fund by seeking to balance capital appreciation, income generation and risk of loss by investing in a diversified global portfolio of equities, fixed income and commodity-linked instruments.
This means that the Fund must be converted from a fund of funds (which can invest in multiple underlying funds with a maximum exposure of 75% to any one fund) to a feeder fund (which can invest in only one underlying fund). Investors will be charged a single investment management fee based on the Orbis SICAV Global Balanced Fund’s performance relative to its benchmark, rather than separate fees based on the performance of multiple underlying Orbis funds relative to their respective benchmarks.
Investing solely in the Orbis SICAV Global Balanced Fund effectively transfers full responsibility for asset allocation from Allan Gray to Orbis. We believe that Orbis is well equipped to assume the responsibility for the Fund’s asset allocation given that they are already responsible for picking the underlying global assets and have successfully developed a track record in asset allocation.
2. Rename the Fund in line with the conversion
The Fund’s name will change from the Allan Gray-Orbis Global Fund of Funds to the Allan Gray-Orbis Global Balanced Feeder Fund.
3. Change the Fund’s benchmark to reflect that of the Orbis SICAV Global Balanced Fund
The Fund’s benchmark will change from 60% FTSE World Index, with gross dividends reinvested, and 40% JP Morgan Global Government Bond Index, to the Orbis SICAV Global Balanced Fund’s benchmark of 60% MSCI World Index, with net dividends reinvested, and 40% JP Morgan Global Government Bond Index.
When the Fund was launched, the FTSE World Index was the most representative benchmark for the investable universe of global equities, but the MSCI World Index is now considered by most global equity managers to be a more appropriate benchmark. The change from gross to net dividends reinvested also better reflects the fact that investors would typically be subject to dividend withholding taxes, both in the Fund and if invested in the securities that constitute the benchmark.
Summary of the proposed changes
If you have any questions, or require assistance or additional information, please contact your financial adviser, our Client Service Centre on 0860 000 654 or email info@allangray.co.za.
