Page 169 - Profile's Unit Trusts & Collective Investments - September 2025

Fund manager interviews Chapter 9

„ Holding managed volatility equity fund exposures in South African and in the US when deemed
relevant to manage equity market volatility risk
„ The implementation of dynamic equity market hedges through which we limit the impact of
equity market drawdowns on fund returns
„ The implementation of FX hedges through which we manage non-rand currency risk
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?
Based on Citadel Asset Management’s current (mid-August 2025) fundamental view of the global
macro economy and prevailing asset class valuations, these are our expected returns over the next
2 to 3 years:
„ South African cash screens Above Neutral currently
„ On the back of the significant rally in the asset class, South African government bonds are
offering potential future returns that are somewhat lower than what investors have historically
expected from the asset class
„ South African Equity is currently on a Neutral valuation signal
„ US government bonds’ valuation signal is also Neutral, while expected returns on US fixed
income spread products (eg, US investment grade corporate bonds and US high yielding
bonds) are Below Neutral
„ US equity markets screen as expensively valued currently, while the combination of somewhat
cheaper Japanese, EM and European equity markets result in global equity with a slightly
Below Neutral valuation signal
Are equity markets in general overpriced? Do you anticipate a significant correction?
On the back of the significant recovery from the 8 April 2025 low (and as at mid-August 2025)
equity markets are no longer inexpensively priced. A correction could occur (and could be healthy)
but at current levels of +/- 10% expected return per annum for the next 3 years, both SA and global
equity still offer decent returns in rand terms over the medium return.

Offshore investments are heavily influenced by the rand. Give your view on the rand over the
next 1, 3 and 5 years.
The rand is currently being supported by the weaker US dollar, general risk-on sentiment and
looser financial conditions globally and the improving SA trade balance. In mid-August 2025, at
current levels of +/- R17.50 to R17.75 to the US dollar, the rand does no longer offer good value, in
our view. Although it could still strengthen from these levels, particularly if the US dollar weakness
persists, we are of the opinion that the rand will likely struggle to strengthen sustainably below R17
to the US dollar over the medium term, unless the SA economy gets a significant growth boost from
marked further economic stimulus in China.

Could you identify three shares that fall within your universe that you think will perform well
in the medium term?
In the H4 Worldwide Equity Fund we achieve our equity exposures via passive investment
vehicles/mandates. The fund’s South African Equity exposure tracks that of the FTSE/JSE
Capped Top 40 index while the offshore equity exposure is split among developed market (DM)
and emerging market (EM) equity ETFs. We are therefore not doing direct equity security selection,
either domestically or offshore, in this fund.
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Profile’s Unit Trusts & Collective Investments September 2025 167