![]() ![]() Against this backdrop, we remain negative on global bonds, with zero exposure to global sovereign debt in our portfolios. The developed world continues to demonstrate its ability to support local economies – this is in stark contrast to the emerging world outside of Asia. ![]() While the world comes to grips with potential second wave pandemic risks, coupled with the acceptance that a vaccine remains the only feasible offramp, market sentiment continues to swing between optimism (driven by unprecedented fiscal and monetary stimulus around the world) and pessimism (driven by a severe global recession). Coronation: Reinforcing the value of active management The key for us, as well as financial advisers and their clients, is to stay disciplined and follow our processes. On a five-year view, we would be disappointed if we can’t achieve real returns more comparable to the Fund’s longer-term history, rather than those of the last few years. While in the short term we think markets, especially US, have run ahead of fundamentals, many local shares are cheap in a more normalised world. Within this exposure, we look to balance our dual-listed exposure with what we believe are some depressed local shares that have significant potential upside. Just over 40% of the Allan Gray Balanced Fund is allocated to local equities. It seems as if the potential pain trade is local equities outperforming local government bonds. ![]() This awakens the contrarian in us, and we observed with much interest the significant price moves in many domestic shares two weeks ago when managers tried to switch into them. In our view, the local asset management industry is extremely positioned, with most managers owning the same large dual-listed shares, combined with a full weighting in large-cap offshore equity, offset by a long SA government bond position. While these distorted markets are frustrating for value investors, we are thinking hard about portfolio risk and constructing a diversified portfolio of undervalued assets. This is occurring at the same time as an ever-greater portion of US voters are leaning to the left. With that money you could buy the whole of Richemont plus British American Tobacco in a month. The focus will then shift to the economic cost, and the subsequent public sector and central bank response across the world.įor example, the US Federal Reserve committed to buy at least US$120bn of debt per month. The headlines about COVID-19 will eventually subside, given the very low mortality rates. Allan Gray: Discipline is key at times of distress ![]()
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