Page 156 - Profile's Unit Trusts & Collective Investments - March 2026

Chapter 9 Fund manager interviews

instruments, bonds, listed property, as well as international equities and fixed interest assets.
Our focus at Matrix Fund Managers is on liquid markets, larger cap stocks, top quality debt issuers
and active asset allocation and we aim to achieve our CPI + 3% on a consistent basis with the
highest probability of success.
Ultimately, our idea of an ideal investment is an asset or asset class that is expected to outperform
our real return target with a high likelihood and limited tail risk.

Comment on your investment year (January – December 2025) from a fund manager’s point
of view
The fund delivered performance of +18.9% after fees over the 2025 calendar year. With year-on-
year inflation expected to be around 3.5%, this resulted in a 2025 real return of 15% (well ahead of
the inflation plus 3% return target).
Asset class contributions to return over the year were as follows; domestic equity (+7.4%),
domestic property (+2.2%), domestic bonds (+7.2%), domestic money market (+1.5%), foreign
equity (+0.9%) and foreign fixed income (-0.8%). A big contributor to our absolute and relative
performance was being underweight offshore relative to local equity. For some time we have been
favouring local assets to offshore assets that worked well in 2025.
The dollar depreciated 9.4% over the year, precious metal prices soared while oil prices fell, the
government of national unity remained intact, supporting foreign investor confidence and capital
inflows, and expectations mounted that easing loadshedding would raise GDP growth in 2026.
All of these factors were supportive of strong asset growth in SA from an equity and fixed income
perspective.
SA equities over the full year, notably the FTSE/JSE Capped SWIX gained +42.6%, almost double
the +24.2% delivered by bonds. South African equities also returned more than twice the +20.4%
(USD) return generated by global equities in 2025. Bonds benefitted from the country’s lower and
more stable inflation rate as well as the lowering of the inflation target from 4.5% to 3.0%. Strong
demand saw the 10-year generic bond yield fall by roughly a 170 bps over the course of the year.
In terms of risk management, what methods or strategies are you able to use to protect your
clients’ investments?
We believe that our Active Asset Allocation process reduces downside risk and produces
consistent inflation beating returns:
„ We build the portfolio from the bottom up, starting with “zero weight” in each asset class. We
allocate the % weight to each asset class to allow us to deliver the return objective of the portfolio
with the highest probability.
„ This is opposed to starting with a strategic benchmark weight and then adding or subtracting a
tactical weight for each asset class.
„ In arriving at our ideal asset allocation weights, we consider the likely distribution of potential
returns from each asset class to better understand the risk/reward trade-off from each asset
class and the contribution that each asset class is likely to make in delivering the return objective.
„ We use a return distribution for each asset class as we recognise that we cannot tell the future
with 100% accuracy and that overly relying on a single point estimate of return for each asset
class would be misleading. For example, a low-probability scenario in a single asset class
may occur, which could unwittingly drown out the performance of the rest of the portfolio if this
scenario is not considered when constructing the portfolio.
„ The expected asset class return distributions are updated at our monthly Asset Allocation
Committee meetings, based on our team’s fundamental views and valuation models for each
asset class.
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 external environment has improved markedly for SA with an apparent turn in the dollar cycle
leading to EM currency strength, commodity strength and a lower cost of capital. These forces have
knock on effects into lower domestic inflation and improved fiscal outcomes, a positive feedback loop

154 Profile’s Unit Trusts & Collective Investments March 2026