A fund with 6% fees?

The listing of the Allan Gray-Orbis Global Balanced Feeder Fund on the JSE as an actively managed ETF (AMETF) this week has drawn sharp attention to its fee structure.

It has handily outperformed the benchmark, with a return over the past year (to end October) of 28.8% in rand terms (31% in US dollars). This compares to the benchmark, which is up 12.7% in rand over the same period.

The total expense ratio charged for this over a one-year basis is 6.17%. Add in transaction costs, which include value-added tax (Vat), and this increases to 6.26%.

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The bulk of this comprises performance fees of 5%. The base fee charged is 1.1% per year.

Allan Gray does not charge a management fee in the feeder fund, which invests solely into the $5.9 billion Orbis SICAV Global Balanced Fund. It is paid a marketing and distribution fee by Orbis.

It says: “Orbis charges a unique refundable performance-based fee in Orbis Global Balanced, which is designed to align Orbis’ interest with investor outcomes. The fee consists of a base fee and a refundable performance fee. In traditional fee structures, the total fee is paid to the manager immediately. When the Orbis fund outperforms, the performance fee is paid into a fee reserve and enables Orbis to refund investors if the Orbis fund subsequently underperforms”.

This performance fee is calculated as 25% of the value added or lost relative to the benchmark.

This means that fees in the fund will adjust by 0.25% for every 1% of outperformance or underperformance. For outperformance, the performance fee is uncapped.

In practical terms, during periods of outperformance, Orbis’s share (the 25%) is paid into a ‘fee reserve’, which reinvests this into the fund and earns the same return as investors do.

If the fee reserve has a positive balance, money is paid to Orbis as fees for outperformance. This payment is one-third of available performance fees, capped at 2.5% per year.

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In periods of underperformance, the fee charged by the fund could actually be negative as performance fees can be refunded from that fee reserve. Allan Gray notes that at the end of September, “performance fees of 6.4% were available for refund in the event of subsequent underperformance”.

If the fee reserve is depleted, Orbis keeps track of subsequent underperformance after deducting the base fee and doesn’t “charge performance fees on any future outperformance until all of these losses have been recovered”.

Cost breakdown for the periods ending 30 September 2025	One year	Three years
Base fee	1.10%	1.10%
+ Performance fees	5.00%	2.59%
+ Other costs, excluding transaction costs	0.07%	0.07%
+ Vat	0.00%	0.00%
= Total expense ratio	6.17%	3.75%
+ Transaction costs, including Vat	0.09%	0.07%
= Total investment charge	6.26%	3.82%

When it comes to measuring the performance fee, the benchmark for this fund is 60% MSCI World Index with net dividends reinvested and 40% JPMorgan Global Government Bond Index.

The fund has outperformed the benchmark in both rand and US dollar terms since inception in 2004, with a step up in outperformance over the last five years (18.1% versus 9.4%, annualised in rand) and three years (20.5% versus 12.2%).

At the end of October, the fund had a far lower exposure to the US (all asset classes) of 39.8% against the benchmark’s 64%. It had a larger exposure to the UK (12.7% versus 4.6%), while its outperformance was no doubt driven in large part by its 23.1% exposure to emerging markets, against the benchmark’s 0%.

Coronation’s Global Optimum Growth Feeder Fund, which is a similar global balanced fund, has a slightly different benchmark for fees.

It tracks 35% MSCI World Daily Total Net Return Index, 35% MSCI Global Emerging Markets Daily Total Net Return Index, and 30% Bloomberg Global Aggregate Bond Total Return Index (unhedged in US dollars).

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Over the same period (to end October), this benchmark was up 17.5% over one year in rand terms. The Coronation fund was up 27.9%, after fees. This fund shares in 20% of the performance above the benchmark, up to a maximum of 1.4% per annum.

It measures performance over a 24-month period.

Its total expense ratio is 1.81% for one year, as at 31 October, which includes a performance fee of 0.56%. Including transaction costs of 0.24% results in a total investment charge of 2.05%. From 1 October 2026, it will charge a new fixed fee of 1.4% per annum, regardless of under- or outperformance.

Along with the Global Balanced Feeder Fund, Allan Gray will also list its Allan Gray-Orbis Global Equity Feeder Fund on the market as an AMETF on Thursday.

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Rival Ninety One listed two AMETFs in November: the Ninety One Diversified Income Prescient Feeder AMETF and the Ninety One Global Diversified Income Prescient Feeder AMETF.

The JSE said these expand its “growing suite of AMETFs, offering South African investors a transparent, liquid and cost-efficient vehicle to access a local and global diversified income-focused strategy, traded in ZAR”.

In mid-November, the total number of ETFs on the JSE was 125.

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