As the GFC started to unfold, Real Estate Investment Trusts (REITs) quickly fell in value, from a generous premium to just 75% of their book value. Allan Gray saw a contrarian opportunity, stepped up to the plate, and started investing in the sector.

Simon Mawhinney, Chief Investment Officer of Allan Gray, recalls how the sector then plunged further, first to 50% of book value, and then capitulating to 25%. The most extreme case, Centro Retail Trust, fell to just 4% of book value. 

Allan Gray was heavily exposed, and in 2008 their flagship fund returned -45.9%, the largest drawdown in its 12-year history. Recalling this experience, Simon told us: 

"We had a very large drawdown, but it felt right... but very awkward." 

The following snapback was swift, and in 2009 the same fund delivered a 55.1% return.

In our latest CIO profile, we learn about the ‘feast and famine' nature of contrarian investing, why a long-term approach is essential to success, and then finish with Simon’s contrarian case for Telstra.    

Topics discussed 

• The feast and famine nature of contrarian investing.
• Investing in REITs during the GFC. An experience that felt very awkward at the time but ultimately became highly lucrative for investors. 
• The difference between deep value and value traps.
• Examples of where Allan Gray is concentrating their investments today.
• Why aligning CEO remuneration with shareholder interests can improve outcomes for investors.
• The contrarian case for investing in Telstra. 

Going against human instinct and taking a contrarian approach to investing is not for everyone, however there can be great rewards for the patient investor who embraces Allan Gray’s approach. Find out more