Page 177 - Profile's Unit Trusts & Collective Investments - March 2026

Fund manager interviews Chapter 9

in themes surrounding the “AI arms race” such as ongoing geo-political tension, a rush for resource
security, and excess global liquidity. Put more simply: Gold, Copper and Energy Production. At year
end the fund had 6.1% in gold and 4.0% in PGMs.
With the growth and inflation risks around the world, the conflict in the Middle East and Ukraine
as well as the uncertainties around the US/China relationship, we remain cautious and most
critically, mindful of capital preservation. From a risk management perspective boring is good, and
of paramount importance is our continuous efforts to assess senior management teams’ abilities to
maneuver their businesses through these uncertain times in the interest of all stakeholders. We are
constantly testing our assumptions and evaluating portfolio weights to ensure that we do not expose
the funds to undue risks given how fluid local and offshore conditions are.
We can also raise cash, lowering equity exposure, to protect client capital. As times we will also
utilise market hedges in the form of put to protect the portfolio in the event of a correction. These can
include S&P500 puts, Dow puts and Satrix SWIX or ALSI puts.

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?
Domestic Equities entered 2025 with expectations that strong growth would drive a rerating
and higher earnings. However, the first half of 2025 proved a difficult environment as Trump Tariffs
increased volatility amid uncertainty in domestic and global growth. Gold, PGMs, Technology sectors
have been the standout performers. We expect higher Precious Metals prices to be sustained in
2026 which should translate into higher tax revenues, corporate earnings and employee earnings
acting as a catalysts for a broader SA Inc recovery.
Global markets navigated a challenging final quarter of 2025 marked by heightened macro
uncertainty, policy easing and shifting market leadership. While volatility increased, global
equities ended 2025 resiliently as performance broadened into non-US markets, value sectors
and defensives. Portfolio positioning reflected this shift through the team increasing exposure to
emerging market champions, energy and precious metals, alongside selective additions to preferred
US mega-cap holdings.
From a company perspective we continue to place emphasis on strong management teams,
cash generation, sound balance sheets and returns on capital. In the current environment there is a
preference for quality - strong pricing power, strong competitive advantages, high returns and sound
balance sheets.
We do expect market volatility to continue through much of 2026 given the current geopolitical
landscape and present uncertainty. As such we will deploy cash cautiously and very selectively as
opportunities arise.
From a performance perspective Visio looks at expected returns for the market 12 months ahead
at any point in time. Our expected returns at this point in time are: Domestic equity (15%), Domestic
Property (13%), Domestic Bonds (9%), Domestic Cash (7%), Offshore Equity (17%), Offshore
Bonds (8%) and Offshore Cash (6%).
From a target return perspective we aim to achieve CPI + 3% over any 12-month plus rolling
period, as well as to outperform the SA multi-asset flexible equity peer category average.
Are equity markets in general overpriced? Do you anticipate a significant correction?
There is a lot of speculation in markets like AI and commodities, these are more vulnerable to a
correction. Typically, when we see this type of speculation, it is enabled by leverage and when it
reverses, it does so violently. Gold and PGMs were down over 20% in a day at the end of February
2026.
We have also seen rising concentration in the indices which is masking the divergence in
valuations. Apart from commodities as the standout, another example is banks vs retailers. Over the
last year banks have outperformed retailers by almost 60%.
Large cap technology companies, which make up a large and growing portion of major global
indices, are trading at high multiples. Further, on the one hand several companies (Alphabet, Meta,
Amazon, etc.), are deploying a large amount of Free Cash Flow into AI and data centre investment,

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