We have added the Orbis OEIC Global Cautious fund to our Recommended list.

Fund Snapshot

A multi-asset fund with no set cash/bond/equity allocations, with the managers taking a holistic approach to balancing risk and return.  The fund is managed using a distinctive, naturally contrarian approach, with a focus upon intrinsic value and consideration of a company’s entire capital structure. Within its sector, the fund features in our ‘Flexible Mix, Primarily Global Bonds and Global Equities’ category.

Fund Description – Key Points

• Alec Cutler and Mark Dunley-Owen are portfolio managers for the strategy, with Alec Cutler responsible for the strategy overall.  Mr Cutler is extremely experienced in the management of multi-asset funds and has been at the firm for many years, taking full advantage of the firm’s unique bottom-up investment approach.
• The fund draws upon the extensive resources of the wider Orbis group, where differentiated thinking is at the heart of the investment ethos.
• Philosophically, the team believes that markets are not always efficient or rational and they look to identify the stocks and bonds of companies that trade at a significant discount to intrinsic value.  Taking a long-term investment horizon, selected investments are often out-of-favour, misunderstood or spurned by investors.
• The equity allocation typically ranges from 10 to 60%, while up to 90% of the portfolio can be invested in all types of bonds and cash.  Additionally, up to 20% can be invested in commodity-related instruments. To assist in the calibration of portfolio risk, the managers also make use of derivatives for hedging purposes, thereby reducing the net exposure to risk assets at times.

Characteristics and Utility

• Orbis launched its first global multi-asset fund, Orbis SICAV Global Balanced, in 2013.  Global Cautious utilises the same investment philosophy, approach, and toolkit as Global Balanced, but its exposure to riskier assets is materially lower through the cycle.
• The fund resides in the IA Mixed Investment 20-60% Shares sector. There is no set asset allocation framework and the composition of the fund is a function of the bottom-up security selection process.  The overall balance of risk and return is more important than the net cash/bond/equity split.  The 70% global bond/30% global equity benchmark provides a guideline for the fund’s long-term return expectations, but at any point, its composition and behaviour can differ markedly from this, as it can from some of the more traditional funds in the peer group.
• Indeed, risk is defined as the permanent loss of capital, rather than short-term price volatility or the risk of underperforming the benchmark over the short term.
• Although the fund is designed as a lower risk proposition, the value/contrarian approach is still a prominent characteristic.  Investors should be prepared to take a longer-term view, given the scope for variability in its outcome versus sector peers and benchmark.

Two share classes with differing fee structures

Like its sister fund, Orbis OEIC Global Balanced, two share classes are available.

The ‘Standard Share Class’ version is subject to the firm’s refundable performance fee structure. This has been designed such that the fund pays a fee when outperformance is delivered and receives a refund when it underperforms.  The reference composite index is 70% JPM Global Government Bond (hedged to sterling)/30% MSCI World.

The “Fixed Fee Share Class” version is subject to a traditional annual management fee structure.

For further information about the different share classes, please review fund documentation (https://www.orbis.com/uk/intermediaries/fixed-fee-funds/global-cautious-fund) or speak to your Orbis representative.  In addition, we wrote a guidance piece explaining the performance fee structure when we introduced Orbis OEIC Global Balanced to the service in 2019.  You can review this here.