Page 173 - Profile's Unit Trusts & Collective Investments - March 2026

Fund manager interviews Chapter 9

Describe your investment universe
We can invest across most developed and emerging markets. In reality, we focus on the US,
Europe, Asia and Japan as these markets provide a broad coverage of all sectors and economic
groups.

Comment on your investment year (January – December 2025) from a fund manager’s point
of view
We started the year well, lighting into strength in January and February. Navigating the tariff
debacle was a little more challenging as the market repriced risk almost indiscriminately. As we
progressed in late April, we turned adversity into opportunity by buying back many of the stocks that
had been sold off. Clients benefited from a very strong rally into year-end, during which many of the
stocks acquired then almost doubled.

In terms of risk management, what methods or strategies are you able to use to protect your
clients’ investments?
There are three primary strategies we use in protecting client investments. In the first instance,
we hold an average of 15% in cash to buffer the risk inherent in high beta growth stocks. Secondly,
we distribute our active risk positions across sectors and geographies to ensure proper stock/sector
diversification. In the event that markets decline beyond a certain threshold (typically 10%), we add
a third layer of risk management by actively hedging downside risk through short futures contracts
on the S&P 500 or MSCI World Index.
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?
While it’s really difficult to forecast an outcome, we do spend a great deal of time looking at
probabilities associated with different scenarios. Our base case for the rest of this year: a stronger
dollar, lower US inflation, lower US bond yields (20yrs+), weaker EM currencies, weaker EM
markets, stronger commodity prices (on supply/demand imbalances), and a rotation back into high-
growth technology stocks out of defensives. In this regard, we differ from the consensus, which sees
a weaker dollar, higher inflation, and greater prospects for emerging markets.
Are equity markets in general overpriced? Do you anticipate a significant correction?
Our approach views markets through a risk-managed lens. At any point, markets discount all
known risks but are highly sensitive to changes in risk perception. A more recent example is the
huge fluctuation in oil prices over just a few days. This approach is useful because it eliminates the
need to express a view on whether markets are overpriced. A significant correction is a possibility
but this would require a trigger event.
Which asset classes do you expect will give the best total rates of return over the next few
years?
Global growth equities and 20+yr US treasuries.
Offshore investments are heavily influenced by the rand. Give your view on the rand over the
next 1, 3 and 5 years.
Our positive view of the dollar translates into a decline in the rand, but less so than in prior years.
Various segments of the economy are attracting massive capital flows from European investors
who are relocating on a “safe harbour” basis. The decline in state capacity has created a massive
opportunity for the private sector. Both local and offshore entities, whether corporate or individual,
are taking full advantage of this space.
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