Page 185 - Profile's Unit Trusts & Collective Investments - September 2025

Fund manager interviews Chapter 9

and Ninety One, as well as base resource miners. While the Emerging Markets exposure has been
playing out well, the base resource miners have been a drag. We are confident that this will be an
additive exposure going forward.
In terms of risk management, what methods or strategies are you able to use to protect your
clients’ investments?
We base our investments on rigorous fundamental research, where we focus not only on the
upside potential, but also spend a lot of time thinking about the downside risk in a bear case scenario.
It follows that we are very focused on investment risk at a stock specific level, but complement
this with internal risk limits with regards to position sizing, factor risk exposures and liquidity risk.
Additionally, we have a macro-economic analyst that supplements our bottom-up research process
with a top-down risk overlay, allowing us to adjust our sectoral exposure as needed.

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?
The aim with our long only SA fund is to outperform the JSE SWIX over time, but also to provide
something different to investors. Our SA long only fund is essentially the long book of our award-
winning SA hedge fund, meaning it is a best ideas portfolio constructed without any reference
to the benchmark. As a result, the fund has an extremely high active share (ie, stocks not in the
benchmark), and a lower than average correlation to the market. We believe this is an excellent
option for an investor that prefers market agnostic exposure, or that gains their exposure to market
beta cheaply (via an index fund or ETF), and wants to overlay that with alpha through a truly active
manager.

Are equity markets in general overpriced? Do you anticipate a significant correction?
We think that South African and Emerging Markets equities in general remain deeply undervalued,
currently trading near a four-decade low relative to US stocks. While the current period of Emerging
Market underperformance has persisted for an extended period, the cycle is not dissimilar to what
we have seen in the past.
Could you identify three shares that fall within your universe that you think will perform well
in the medium term?
„ We are long AECI on a value unlock narrative. The company is undergoing a strategic
transformation aimed at refocusing to its high-quality, high-margin core operations in mining
explosives and chemicals. Central to this strategy is the divestment of low-margin and
unprofitable segments which may return as much as a third of the market capitalisation
in cash. AECI continues to trade at an attractive multiple of ~4x EV/EBITDA, a discount of
approximately 40% to its international peers. Management’s strategy is already bearing fruit
with EBITDA up 22%, the group returning to double-digit margins, and net debt reducing
by 50%. We believe the continued execution of this disposal and refocus to core will act as
a catalyst for a significant re-rating of the stock, narrowing the valuation gap and unlocking
significant shareholder value.
„ Our team believes that we are at the cusp of a multi-year period of “Emerging market
exceptionalism” – a period marked by sustained outperformance of emerging markets and a
significant reallocation of global capital toward these regions. One of our positions that captures
this structural shift is Ninety One, a global asset manager with a significant proportion of its
AUM exposed to emerging markets. Ninety One recently delivered its first positive net inflows
in 3 years, and we believe this momentum could continue over the medium term.
„ We have recently shorted Chinese toy company Pop Mart. In the collectible-toy world,
2025 has become the year of Labubu, the “ugly-cute” viral sensation that has propelled Pop
Mart’s share price roughly 600% over the last year. The playbook will feel familiar to those
that remember Beanie Babies: a rocket-ship ascent, endless and unpredictable variants, and
manufactured scarcity that drives a bustling secondary market. At the time of writing, the stock
trades around 40x 2025 earnings, pricing in multiple years of strong growth. Forecasts imply
roughly USD18bn in revenue over the next three years – equivalent to almost one Labubu for

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