Allan Gray

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PM.This segment is brought to you by Allan Gray.

More than fifty years of long-term investing.

Allan Gray is an authorized financial services provider.

Several local equity stocks that have struggled this year remain businesses that many investors consider high quality, while some of the JSE's strongest returns have come from a relatively narrow group of shares.

This divergence reflects differences in earnings, expectations, valuation, and investor sentiment across the market.

Allan Gray portfolio manager Rory Kotska-Jacobson joins us on the SAFM Market Update to discuss what is driving these outcomes, where the Allan Gray Equity Fund is finding value, and how valuation informs portfolio decisions when sentiment and performance are concentrated in a handful of stocks.

Rory, thank you very much for your time this evening.

[upbeat music] You're listening to the Allan Gray Podcast.

I'm Talia Patussi, a portfolio manager here at Allan Gray and your host for this episode.

In 2022, two decisions shaped Regulation 28, which are the rules that guide how retirement funds invest.

Firstly, in February of 2022, the finance minister announced in his budget speech that the offshore limit would rise to 45% from a previous maximum limit of 30% outside of Africa, plus a 10% allowance for within Africa.

There have also been some recent recommendations that have come from the National Planning Commission suggesting that having a minimum infrastructure requirement would unlock trillions of rands for local project investment.

Now, we're recording this podcast on the thirteenth of October, one week before the 2026 medium-term budget policy statement and two weeks prior to local government elections, which are set to bring municipalities and the infrastructure challenges felt at grassroots level into sharp focus.

It is against this backdrop that I am joined today by Sandy McGregor and Raine Adams from the Allan Gray investment team to delve into the issues surrounding South Africa's infrastructure investment shortfall.

We're going to discuss whether the increased offshore allowance has been a good idea, what is holding local infrastructure investment back, and whether changing Regulation 28 would actually help or risk being a solution looking for a problem.

Uh, a lot of money was moving, assets under management from large insurers to these startup specialist boutiques.

There was Allan Gray, there was Investec Stock 91, there was Coronation, and there was a company called BOE, which doesn't exist anymore.

Uh, so, you know, again, we developed that business very quickly and grew the assets, and of course, you know, I would love to take all the credit for that, but let's be clear.

Big pension funds, you would go to a new business presentation, walk in, and ultimately, that pension fund would split their money between two or three.

So I always talk about this a little bit like clubbing seals, because we were waiting in the waiting room, Coronation, Investec, Allan Gray, and we almost with certainty knew that either the fund is going to split it as its assets into three or into two.

Mm.

So we got assets.

It's been a raging debate for quite a number of years.

I'm joined on the line by a portfolio manager at Allan Gray, Thalia Patussi, to take a look at this and see what you make of it.

Thalia, lovely having you back on the show.

Thanks so much for taking the time.