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2 DECEMBER 2025

MEETING PURPOSE

Our investment team aim to meet every week to discuss the macro environment and how this could impact our current and future portfolio construction.  

 

KEY TAKEAWAYS

  • Performance Review: SA-focused funds outperformed global-focused ones, driven by a domestic rally (bonds +21%, property +28%, equities – Top40 +40%). The indexation model continues to beat active management with the exception of our Reg 28 Moderate Growth model that outperformed by a small margin over the past year.
  • Short-Term De-Risk: De-risk by moving combined SA & EM equity exposure back to neutral. This creates a cash buffer (targeting 7–11% in global fund and 5-7% in SA Funds) to navigate near-term uncertainty (Fed meeting, Venezuela, US tariff ruling).
  • Commodities Bullish: Technicals show bullish breaks in industrial metals (copper), PGMs (rhodium, palladium), and silver. Silver’s break of a 40-year trendline is a key signal.
  • Dollar Strength: The US dollar is poised for medium term strength, supported by superior US productivity growth and a potential policy divergence with the ECB, which may be forced to cut rates.

 

TOPICS

Fund Performance Review 

SA-Focused Funds/Models Outperformed:

  • Reg 28 Moderate Growth Model : +20.9% vs. sector +17%.
  • Conservative Growth (Inflation+3): +17% (outperforming the low/medium equity sector).
  • Enhanced Income (Inflation+1): +12.3% vs. sector +11.2%.

 

Global-Focused Funds Underperformed in ZAR terms due to ZAR strength over the past year

 

Offshore Model Portfolios (USD):

  • Flagship Model in USD terms: +18% 1-year, +13% 3-year.
  • Manager Allocation Impact in Models due to different investment committees: A 4% 1-year performance gap between models with the same risk profile highlights the significance of manager selection in offshore models.
  • Fortunately all good in absolute terms in USD and ZAR models – we have the same situation in local funds where investment committee mandates/ decisions influence manager allocation decisions.

 

Manager Changes:

  • Rationale: Internal convention policy requires a reduction for any manager in the 4th quartile over one year.
  • Action: We therefore reduced exposure to a small group of fund managers -1-2% reduction, nothing big.

 

Macro & Technical Outlook

US Dollar:

  • Rationale: Superior US productivity growth (driven by AI), falling energy prices, and fiscal stimulus (Inflation Reduction Act) support a stronger dollar.
  • Policy Divergence: The Fed may cut less than the ECB, which faces a manufacturing recession and fiscal issues.
  • Technicals: The DXY index shows a bullish bias, with a break above 100 confirming the trend.

Bonds:

  • SA Bonds: A panel of SA managers (Sasfin, PortfolioMetrix, Methodical, Granate) confirmed a positive outlook, citing a consensus for inflation around 3.5 – 4% and continued value in short-dated and long-dated bonds.
  • US Bonds: The yield curve is steepening as the long end compresses.

Equities:

  • Global: Many major indices (MSCI World, Eurostoxx) show potential Head & Shoulders patterns, signalling a possible rollover.
  • US: The Russell 1000 Value index is the strongest technically, holding its bullish break. Its composition is defensive (Berkshire, Financials, Industrials, Health Care and Consumer Staples) and less tech heavy.
  • SA: The RESI index (resources) is bullish. SA Inc. (financials, retail) is weak, decoupling from bonds due to competition (banks and retailers) and consumer pressure. This is the area we will consider a small reduction in exposure.

Commodities:

  • Industrial Metals: The index is poised for a mid-range bullish break. Copper is at a key resistance level.
  • PGMs: Rhodium and Palladium charts are bullish, with rhodium holding a break and palladium consolidating.
  • Precious Metals: Gold is consolidating near all-time highs. Silver’s break of a 40-year trendline is a major technical signal.
  • Liquidity Risk: Commodities are less liquid than equities, making them vulnerable to large investment flows that can cause sharp price swings.

 

Next Steps

  • De-risk portfolios by moving SA & EM equity exposure to neutral and building a cash buffer.
  • Maintain a neutral stance until the Fed meeting and other key events (Venezuela, US tariff ruling) provide clarity.
  • Meet with Old Mutual to discuss their local Gold fund and World Rafi index today – will provide feedback if interesting .

 

The content of this article is for information purposes only and does not constitute an offer or invitation to any person. The opinions expressed are subject to change and are not to be interpreted as investment advice. You should consult an adviser who will be able to provide appropriate advice that is based on your specific needs and circumstances. The information and opinions contained herein have been compiled or arrived at from sources believed to be reliable and given in good faith, but no representation is made as to their accuracy, completeness or correctness.3 

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