Investing

Allan Gray – the man who became a household name in South Africa

Allan Gray has become a household name in South Africa, synonymous with long-term investing and traditional investing practices. 

This was made possible by the firm’s eponymous, who left behind a legacy of exceptional investment management and a commitment to positively impacting society.

Allan Gray is an investment management firm headquartered in South Africa. It has a reputation for long-term investment, sound financial principles, and performance.

In addition to South Africa, Allan Gray has offices in Namibia and Botswana. It also has an affiliate office in Australia. 

The firm is the fourth-largest asset manager in the country, with R526.03 billion in assets under management as of June 2023.

The firm describes its investment approach as pursuing long-term returns without taking undue risks.

“We look closely at businesses. We buy shares we think are undervalued and sell them when we think they have reached their worth, regardless of popular opinion,” the company said.

This strategy has paid off handsomely for the investment firm, which celebrated its 50th anniversary last year. 

It has a strong history of winning industry awards, particularly for its consistent performance and investment philosophy. 

The firm has achieved success by consistently focusing on the long term –a value embedded in the company by its founder, Allan Gray.

Gray was born in East London, South Africa, in 1938 and had a keen interest in finance from a young age.

His family had migrated from Aberdeen, Scotland, to the then Cape Colony town of Butterworth in the 1890s.

His grandmother, Grandma Gray, had been brought up in the hard days of the Scottish fishing village of Aberdeen and made a living through building, while raising seven children.

She built the first hospital in Butterworth and later became the first woman mayor in South Africa when she was elected mayor of Butterworth.

Gray has previously said that his grandmother played a large role in his future success by instilling a family focus on education.

He attended high school at Selborne College in East London and stayed close to home while at university. He studied accounting at Rhodes. He went on to earn an MBA at Harvard Business School in 1965.

“Education would remain a passion throughout his life, fed by his grandmother, who is a legend in her own right, and by his own simple philosophy that the most significant investment one can make is into human capital,” according to journalist Sasha Planting.

His love for education and impressive business success came despite the fact that Gray was dyslexic.

Harvard Business School would later describe him as “a keen investor who has been fascinated by stocks since he was a boy” when Gray received an Alumni Achievement Award in 2010.

“Gray has built a successful career around finding and investing in companies priced well below his assessment of their intrinsic value,” the school described.

Allan Gray

After earning his MBA, Gray sharpened his skills as a portfolio manager with Fidelity in Boston, where he worked for eight years.

This is where Gray’s skill and reputation as a contrarian investor were cemented. 

During the stock market crash of 1962, the market fell 21.7% in January and remained subdued until October that year, yet Gray’s manager’s portfolio was reportedly up 10%.

He returned to South Africa in 1973 to found what would become Allan Gray Limited in Cape Town. 

The company initially focused on investment counselling to retail investors but later grew to include institutional clients and a full spectrum of services.

Gray’s intention was to start a firm dedicated to meeting clients’ needs, including delivering superior returns through rigorous company research.

While many financial institutions then employed huge sales forces, Gray believed a more concentrated focus on asset management and service would yield superior results. 

The approach worked so well that the company became the largest privately owned, independent asset management firm in southern Africa.

Gray was reportedly an intensely private man who refused interviews, high-profile events and obvious displays of wealth. 

This is why, in the late 1970s and early 80s, just as his business, Allan Gray Investment Counsel, was growing in Cape Town, he was dubbed the “ghost of Cape Town”.

At the time, he focused on his clients and his clients alone. He was not interested in building a “brand” and only allowed his partners to market the company more aggressively when he moved to London in 1989. 

It was at this point that the Allan Gray brand began to assume a more prominent role in South Africa’s financial markets.

However, anticipating the end of exchange controls in South Africa, Gray left the country with his son, William, in 1990 to establish Orbis Investment Management in Bermuda. 

This was done to expand the firm’s global investment capabilities and focus on international investment opportunities.

The company underwent a rebranding in 1992, adopting the name Allan Gray Limited

William rejoined Orbis in 1993 and is still chair of the firm’s board. He is also a director of Orbis’ Bermuda and Luxembourg funds and Orbis Allan Gray. He previously led the firm’s investment team for over 20 years.

“We are partners with Orbis, with whom we share a founder, investment philosophy and values. Orbis provides us with access to foreign markets, backed by expert research and a long-term track record,” Allan Gray explained.

In 2005, Gray created the Allan Gray Orbis Foundation to make a long-term contribution to South Africa’s education by offering scholars high school and university scholarships.

“We attack poverty by investing in, nurturing and empowering entrepreneurs and leaders who benefit society by helping to accelerate meaningful employment creation while embodying the values and behaviours of ethical leadership,” according to the foundation’s website.

Later, in 2015, Gray created the Allan & Gill Gray Foundation, which was endowed with the family’s controlling interests in the Orbis and Allan Gray groups.

According to a letter to his shareholders, Gray transferred control of Allan Gray Limited and Orbis to the charitable Allan & Gill Gray Foundation.

“We consider this both the right thing to do and a small but necessary contribution toward a society full of hope for all humanity,” he said.

“The free enterprise system has done so much for so many, and it behoves the few whom it rewards particularly well to help those less fortunate.”

Gray passed away in November 2019 but left behind a legacy of exceptional investment management and a commitment to making a positive impact on society. 

“For more than 40 years, our experience has shown that taking a long-term perspective with a contrarian stance can produce demonstrably superior results – but only if one can withstand uncomfortably long periods of underperformance,” he said in a letter to clients in 2015.

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