Magda Wierzycka’s R1 million bet with Allan Gray

Sygnia’s Itrix S&P 500 exchange-traded fund (ETF) significantly outperformed Allan Gray’s Orbis Global Equity Feeder Fund over five years.

In June 2019, Sygnia CEO Magda Wierzycka bet R1 million, to be donated to charity, that a simple S&P 500 index tracking fund would outperform Allan Gray’s Orbis fund over five years.

The Allan Gray Orbis Global Equity Feeder Fund’s goal is to create long-term wealth for investors by investing in stock markets around the world.

“It aims to perform better than global stock markets without taking on greater risk,” Allan Gray explains.

The Allan Gray Orbis Global Equity Feeder Fund consists of 96.5% global equities, which is a suitable fund to compare with an S&P 500 index-tracking ETF.

Unless Allan Gray’s Orbis fund can outperform Sygnia’s Itrix S&P 500 ETF, it raises the question of why investors should invest in it and pay higher fees.

This is why Wierzycka bet R1 million to see which fund performs the best. Although Allan Gray did not respond to the Sygnia CEO’s bet, she did not let the issue go.

“As to Allan Gray and Orbis, all the marketing and billboards cannot gloss over poor performance and outrageous fees,” she said.

In August 2020, she doubled down, saying, “My R1 million wager on outperforming Allan Gray’s Orbis Global Equity Fund stands firm.”

“Still no takers from Allan Gray. Come on, have some faith in your own abilities if you are charging for them.”

Former Sygnia CEO David Hufton also weighed in on the R1 million bet, saying Allan Gray should “put their money on the line to back the skills they ask customers to pay good money for”.

It has now been five years since Wierzycka bet Allan Gray that an S&P 500 index-tracking fund would outperform their Orbis fund.

• The Sygnia Itrix S&P 500 ETF produced a total return of 20.5% per year.
• The Allan Gray Orbis Global Equity Feeder Fund produced a total return of 16.1% per year.

This means Sygnia’s Itrix S&P 500 ETF significantly outperformed Allan Gray’s Orbis Global Equity Feeder Fund over five years.

It is striking that the Allan Gray Orbis Global Equity Feeder Fund has underperformed its benchmark since its inception, and over the last five years.

The fund’s benchmark is the MSCI World Index, including income, after withholding taxes.

Apart from the difficulty of picking shares that can outperform an index, fees are another challenge of an active management fund.

The total investment charge (TIC) for Sygnia’s Itrix S&P 500 ETF is 0.20%. This fee is exclusive of value-added tax (VAT).

The total investment charge for Allan Gray’s Orbis Global Equity Feeder Fund over the last three years was 1.25%.

Simply put, investors pay much higher fees to Allan Gray to manage a fund that underperforms competitors with much lower fees.

Sygnia Itrix S&P 500 ETF versus Allan Gray Orbis Global Equity Feeder Fund

The table below compares the total return of the Sygnia Itrix S&P 500 ETF and the Allan Gray Orbis Global Equity Feeder Fund.

Fund	Allan Gray Orbis	Sygnia’s Itrix S&P 500 ETF
1 Year	16.1%	19.9%
3 Years	13.1%	18.8%
5 Years	16.1%	20.5%