Manager Research

Allan Gray informed the market last week that Ruan Stander, multi-counsel^[1] portfolio manager on the Allan Gray Equity and Balanced funds, and sole portfolio manager on the Allan Gray Optimal fund, will be leaving the business at the end of February. Ruan joined Allan Gray as an analyst in 2008 and became a portfolio manager on the Optimal fund in 2012, an associate portfolio manager on Equity and Balanced in 2013 and portfolio manager on those funds in 2015. He is leaving the business on good terms and intends to leave the asset management industry to focus on spending time with family and managing his own personal investments.

Ruan’s slice of the Equity and Balanced funds has been reallocated between the remaining portfolio managers on the funds (CIO Duncan Artus, Jacques Plaut, Tim Acker, Rory Kutisker-Jacobson), while Sean Munsie, multi-counsel portfolio manager on the Allan Gray Stable fund, will take over the sole management of the Optimal fund.

While Ruan’s departure appears manageable in isolation, it follows the departure of ex-CIO Andrew Lapping, Mark Dunley-Owen, Leonard Kruger and Nick Ndiritu (portfolio manager on the Africa funds) last year, and Simon Raubenheimer in 2018. We commented on the most recent changes here. The cumulative impact and loss to the institutional memory and experience of the overall team over the last two years is therefore significant.

We have always had high levels of confidence in Allan Gray as a business, and their focus on succession has largely mitigated the impact on the funds despite the team changes. However, incremental changes like Ruan’s departure do make us reevaluate their ability to retain senior staff, especially with the current trend towards emigration, which we are seeing across the industry.

It is often easy to focus on the change and to lose sight of what remains in place. Allan Gray is a stable business with a long-standing process and philosophy and an embedded culture. The remaining team is still broad and experienced^[2] despite the string of senior departures over the last two years. Within that context we remain confident and have retained Tier 1 ratings on the Balanced and Equity funds.

We have more concerns on the Optimal fund, however. The fund falls somewhat outside of the typical Allan Gray process, in that it is managed by a single portfolio manager and not on a multi-counsel basis. Sean Munsie was promoted to manage a small slice of the Stable fund last year and has little portfolio management experience outside of this and a notional equity portfolio. While we were impressed by Sean, we feel that he needs more experience in this role, especially given the unique nature of the mandate (primarily hedged equities) and the relative autonomy with which it is managed. We also expect the fund to be more closely aligned with the houseview process going forward. We also have concerns around the fund retaining its current investment mandate longer term, where the potential for change or consolidation appears higher than other Allan Gray funds. As a result of the changes we have decided to downgrade the fund to Tier 3.

Our final ratings on the funds are shown in the table below: