Page 166 - Profile's Unit Trusts & Collective Investments - September 2025

Chapter 9 Fund manager interviews

our credit process to assess credit risk before we assume the exposure. The fund, being a money
market fund and low risk by nature, high-quality issuers or instruments are preferred for inclusion in
the portfolio.
The fund is managed according to the guidelines provided by the mandate, diligently maintaining
adequate liquidity levels while keeping return volatility low. Term risk is carefully monitored, ensuring
that the weighted average duration remains within limits and is adjusted as the interest rate
environment changes.

Comment on the year ahead and, if possible, estimate the performance of your fund over 2 or
3 years. What are your targets and objectives for the year ahead?
Growth, as measured by GDP, is expected to remain below long-run historical averages due
to persistent structural challenges in the country. Earlier in the year, we were more optimistic that
improved reliability from Eskom’s electricity supply, combined with accelerated private investment
in renewable energy and stronger maintenance efforts, would improve business conditions and
support growth. However, we have since revised our growth expectations lower for 2025 and the
outer years, as global tariff pressures have created a highly unpredictable environment and domestic
economic activity has been weaker than anticipated.
While it is not the nature of a money market fund to predict returns, we take pride in our consistent
ability to deliver inflation-beating performance within mandate parameters. This remains exactly
what is required from this asset class.

Give your views regarding interest rate trends and the yield curve over the next 1 to 2 years.
What interest rates can investors expect? Do you anticipate further repo rate cuts?
At the July 2025 Monetary Policy Meeting, the governor announced that the SARB will now aim
to anchor inflation expectations at the lower end of the official 3% to 6% target range set by the
National Treasury, at 3%, rather than the previous midpoint of 4.5%. This decision followed extensive
consultation and research, which highlighted that South Africa is an outlier among emerging market
peers due to one of the widest inflation target ranges. The analysis also showed that this has
contributed to relatively higher general price levels compared to other emerging markets.
Although inflation may edge higher as fuel price base effects fade and food inflation rises, we
believe it remains well contained for the foreseeable future, supported by relatively stable oil prices,
a stable rand, and lower inflation expectations following the revised target.
Looking ahead over the next two years, we expect continued central bank action domestically.
The SARB’s Quarterly Projection Model (QPM), which forecasts key variables such as inflation
and output growth by combining historical data with structural economic relationships, projects
lower inflation under this 3% anchoring scenario. This should provide room for further monetary
accommodation through gradual rate cuts over the next two years.
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H4 Stable Fund

Sector: South African–Multi Asset–Low Equity
Portfolio manager: Yolanda Naudé
Benchmark: (ASISA) SA MA Low Equity peer group average

Returns to investors 1 year 3 years
H4 Stable Fund 14.25% 13.46%
Sector Average 12.98% 11.39%
Inflation (CPI) 3.02% 4.49%
ProfileData performance stats to 30 June 2025: CAGR with dividends reinvested
Describe your investment universe
The H4 Stable Fund is a low to moderate risk multi-asset portfolio, which aims to achieve modest
capital appreciation over the medium-term. The portfolio invests across a range of asset classes

164 Profile’s Unit Trusts & Collective Investments September 2025