Page 180 - Profile's Unit Trusts & Collective Investments - March 2026

Chapter 9 Fund manager interviews

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 + 5% over any 12-month plus rolling
period, as well as to outperform the SA Multi Asset High 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,
while many others (Nvidia) are generating a large portion of their earnings from this same data centre
spend. The economic returns of this AI spend are uncertain and it is a highly competitive space.
The primary companies and products in the AI space (OpenAI, Anthropic) are not yet profitable.
We can’t be certain that there will be a significant correction however, we don’t believe investors are
being adequately compensated for the risk they are taking at these valuations and earnings levels.
Companies in sectors less affected to AI disintermediation across the globe, certain well capitalised
South African companies and specific geographies, such as Japan and India, all provide new
avenues for measured portfolio diversification.

Which asset classes do you expect will give the best total rates of return over the next few
years?
Equities. Should government’s reforms materialise and the GDP growth rate improve, SA Inc should
do very well. Companies have survived a no growth environment for many years. They are lean and
highly leveraged to top line growth. Many of these companies trade at single digit multiples and high
dividend yield. Should the growth not materialise, we should still see double digit return with low
downside.
Activist positions, gold, energy and certain commodities. The US is continuing to compound record
levels of government debt while engaging in global military and economic warfare. The global race
for AI and energy investment will add further tailwinds to these asset classes.

Could you identify three shares that fall within your universe that you think will perform well
in the medium term?
AngloGold, Truworths and Glencore.
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178 Profile’s Unit Trusts & Collective Investments March 2026