Page 170 - Profile's Unit Trusts & Collective Investments - March 2026

Chapter 9 Fund manager interviews

Comment on your investment year (January – December 2025) from a fund manager’s point
of view
2025 was defined by complex volatility. While the underlying secular trend of AI adoption
remained robust, the “macro” frequently interrupted the “micro”. We navigated significant periods of
turbulence, notably around US President Trump’s “Liberation Day” and subsequent shifts in US trade
policy. The introduction of new tariffs and escalating geopolitical risks required a nimble approach
to portfolio weighting. However, these periods of volatility ultimately reinforced the dominance of
companies with global scale and pricing power, as their fundamental earnings remained resilient.
In terms of risk management, what methods or strategies are you able to use to protect your
clients’ investments?
Our primary defensive strategy is in the quality and “moat” thickness of our holdings. We view
these large-cap tech giants as the “new defensives”. We rigorously monitor:
„ Balance sheet strength: We prioritise companies with massive net-cash positions, which act
as a buffer in high-interest-rate environments or credit tightening.
„ Profitability vs speculation: Unlike the dot-com era, our universe consists of highly profitable
entities. We focus on free cash flow yields to ensure we aren’t overpaying for “hope”.
„ Structural moats: We analyse the stickiness of ecosystem integrations (e.g. cloud
infrastructure and cybersecurity). These services are often the last to be cut from corporate
budgets, providing a natural hedge against economic downturns.
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?
We remain confident that our core holdings will continue to widen their competitive leads. In the
next 24 to 36 months, we expect the transition from “AI capex” to “AI returns” to accelerate.
„ Efficiency gains: We anticipate these companies will increasingly use their own AI tools to
optimise internal margins, creating a “double win” of revenue growth and expense reduction.
„ The capex cycle: While the market occasionally frets over high capital expenditure, we view
this as a necessary “barrier to entry” that competitors simply cannot match.
„ Objectives: Our target is to provide consistent alpha by staying invested in the secular winners
of the AI age while managing the entry points in inevitable short-term market corrections.

Are equity markets in general overpriced? Do you anticipate a significant correction?
We do not believe the broader market is overpriced, though we acknowledge that pockets of
exuberance always exist. Valuation must be viewed through the lens of growth; a company trading at
a premium price-to-earnings ratio is often “cheap” if its earnings trajectory is fundamentally altered
by new technology. While a “significant correction” is always a statistical possibility in equity markets,
we believe that long-term investors positioned in the leaders of next-generation innovation are best
placed to weather such events. History shows that innovation-led growth is the most reliable antidote
to market-wide stagnation. One area of interest in more recent weeks has been the software sector,
where a software-as-a-service apocalypse (or SaaSpocolypse) is playing out – a narrative-driven
rout where trillions in market cap have evaporated as investors bet that autonomous AI agents and
“vibe coding” will render the traditional, high-margin “per-seat” subscription model an expensive
relic. This area will be closely monitored over the short to medium term for fundamental changes.

Offshore investments are heavily influenced by the rand. Give your view on the rand over the
next 1, 3 and 5 years.
The rand has displayed notable resilience and strength over the past 18 to 24 months, providing a
strategic “window” for South African investors to diversify internationally.
„ Short term (1 year): We expect continued volatility driven by global geopolitical shifts and
emerging market (EM) sentiment. However, the South African Reserve Bank’s healthy capital
base, bolstered by tax windfalls from precious metal miners, provides a solid cushion.

168 Profile’s Unit Trusts & Collective Investments March 2026