Orbis Global Cautious

Investment process

This fund follows the wider process at Orbis of being contrarian, long-term global investors - searching for intrinsic value in the market. The firm has a bank of around 50 analysts globally, working on in-depth company research across different regions – this is in addition to the eight-strong multi-asset team. All fund managers can see analyst recommendations in real time, and have access to any report or document that any Orbis analyst has ever written about a company. The multi-asset team also brings its own equity and fixed income ideas to the table – with a focus on moderate-risk equities.



The process begins with quantitative and qualitative screening to identify potential areas of interest. This is followed by three phases of fundamental research, designed to find the most promising ideas. The first phase sees an analyst spending a day working on a specific idea/area – any ideas are then discussed between the analyst and the portfolio manager. The second phase is a deeper analysis, which could involve a team meeting on the idea. The final phase is an intensive look at a potential holding, which involves one person leading on the position and a further two members of the team working directly with that person.



The next stage is called Thesis Defence. This is a policy group meeting which acts as a forum for peers to review the potential addition and find possible red flags. The final stage is security selection. The fund is fairly concentrated with around 100-120 positions. Alec directly manages both the equity and currency hedging, with input from the group’s quant and currency analysts. Positions are held with a three to five-year time horizon.

There are subtle differences between this portfolio and the Balanced vehicle. Orbis Global Cautious will typically have double the exposure to fixed income, which will include lower/no allocation to the likes of high yield and a greater focus on government treasuries and Treasury Inflation-Protected Securities (TIPs). The increased fixed income exposure means there is roughly half the amount held in equities (compared to the Orbis Global Balanced fund). Within this allocation, Alec is likely to have less exposure to higher-risk equity names. A good example of the increased risk awareness is their exposure to gold, where the team will have a greater allocation to physical gold over gold equities.


A unique element of this fund is that it has no ongoing charges. Instead, Orbis charge a 40 per cent outperformance fee if the fund outperforms its benchmark (30% MSCI World Index and 70% JP Morgan Global Government Bond Index hedged into Sterling).



These performance fees flow into a revenue reserve where they are held to be used as refunds for future underperformance (the fund refunds at a rate of 40 per cent of underperformance against the fund’s stated benchmark).



The manager's fee is taken from the reserve pot – this is the lesser of a third of the reserve or 2.5 per cent of the net asset value of the fund annually. The move is designed to create a fee structure which aligns the asset manager’s interests with clients.