Page 175 - Profile's Unit Trusts & Collective Investments - March 2026

Fund manager interviews Chapter 9

the sharp bond rally in H2 of the year, we believe the risk-return trade-off at those levels did not justify
extending duration. That discipline served investors well during the more volatile periods of the year.
Our preference for quality floating-rate credit instruments provided steady, reliable income
throughout the year. Towards year-end, we also identified attractive offshore instruments and added
selective offshore exposure, hedging these positions back to rand to eliminate currency risk – an
additional source of return without taking on undue risk.
The Truffle SCI Income Plus Fund delivered 10.76%* for the full 2025 year against the STEFI
benchmark’s 7.52% – a pleasing outcome that we believe reflects a consistent and repeatable
investment process.
* annualised performance for Truffle SCI Income Plus Fund A class for one year to 31 December
2025

In terms of risk management, what methods or strategies are you able to use to protect your
clients’ investments?
Our risk management approach operates on multiple levels to protect client investments:
„ Independent daily oversight: Our compliance and risk team monitor all portfolios daily,
maintaining complete separation from investment managers. They perform pre-trade and
post-trade compliance checks and monitor regulatory limits in real-time using sophisticated
software systems.
„ Diversification and stress testing: We minimise concentration risk across strategies, sectors,
and individual issuers to ensure independent sources of return. All portfolios are stress tested
against various market scenarios including interest rate spikes, credit spread movements,
currency fluctuations, and geopolitical events to understand potential vulnerabilities before
they materialise.
„ Dynamic risk response: We continuously monitor market conditions and make tactical
adjustments when needed. This includes adjusting portfolio duration during interest rate
volatility, repositioning when credit spreads change, and quickly reassessing positions
following credit rating changes or specific credit events.
„ Liquidity management: We actively monitor market liquidity conditions through our network of
market makers and brokers, providing insight into how quickly we can adjust positions when
necessary.
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 Truffle SCI Income Plus Fund aims to achieve higher yields of income than money market
portfolios, while aiming to preserve capital through actively investing in a range of predominantly
South African fixed income securities.
Although markets are ever-changing and our approach to navigating them must remain fluid,
the fund’s core objective remains constant, and we will continue to manage the fund in a way that
honours its objective.
Give your views regarding interest rate trends and the yield curve over the next 1 to 2 years.
What interest rates can investors expect? Do you anticipate further repo rate cuts?
The South African fixed-income landscape has already undergone a significant structural re-
rating. We are now operating in an environment characterised by a permanently flatter yield curve
compared to historical cycles. This shift was cemented by two key developments:
„ The Re-anchored Inflation Target: With the inflation target now firmly established at the 3%
mark, the entire yield curve has shifted lower. This represents a fundamental change in how
the market prices long-term inflation risk.
„ Fiscal Credibility: As fiscal consolidation has taken hold, the market has de-risked South
African debt. This, combined with reduced government bond issuance and a strategic move
toward front-end supply, has successfully compressed the term premium.

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