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Commentary

Fairtree SA Equity Prescient Fund Q1 2026 commentary

06 May 2026, 11:36 Cor Booysen

min read Guides

Market overview

The FTSE/JSE All Share Index (ALSI) decreased by 0.6%, and the FTSE/JSE Capped All Share Index (CAPI) decreased by 0.5% during the quarter. Resources increased by 7.5%, while Industrials and Financials decreased by 8.4% and 0.2%, respectively. The rand depreciated by 2.3%, ending the quarter at R16.94 against the US dollar.

During Q1, Bonds decreased by 3.4% and Cash returned 1.7%. The MSCI Emerging Market Index decreased by 0.2% (in USD), outperforming the MSCI World Index, which decreased by 3.6% (in USD). The MSCI South Africa Index decreased by 3.4% (in USD).

Over the quarter, Iron ore decreased by 1.0% to US$102.9/t, and Brent crude oil increased by 72.6%, ending at US$104.0/bbl. Copper decreased by 1.6% to US$12256.8/t. Gold increased by 8.1% to US$4668.1/oz, Platinum decreased by 5.2% to US$1953.7/oz, and Palladium decreased by 8.6% to US$1480.4/oz, while Thermal coal increased by 28.1% to US$110.4/t.

The VIX Index (Volatility or “Fear” Index) increased by 68.9% to 25.3 during Q1.

Economic overview

The first quarter of 2026 was heavily characterised by heightened volatility, driven initially by shifting US trade policies, fresh global tariff announcements, and US Supreme Court challenges thereof. However, the quarter was ultimately defined by a severe geopolitical shock following “Operation Epic Fury”—coordinated US and Israeli airstrikes on Iran, which led to a broad and swift retaliation from Iran targeting US military bases and Gulf infrastructure. This escalating conflict sent shockwaves through every corner of global financial markets, resetting the broader global inflation and interest rate outlook. In response to the inflationary risks sparked by the conflict, central banks universally adopted a hawkish tone, with the US Federal Reserve signalling fewer rate cuts for 2026.

Early in the quarter, equity markets experienced a noticeable rotation away from US mega-cap technology. This shift was prompted by investor concerns over the returns on massive AI capital expenditures and the potential for AI to disrupt traditional software-as-a-service business models. Consequently, investors rotated capital into Emerging Markets and asset-heavy, cyclical sectors such as materials, utilities, and energy. Despite this early broadening of equity returns, global equity markets sold off sharply toward the end of the quarter as global risk appetite collapsed amid the Middle East conflict.

The geopolitical crisis triggered an extraordinary spike in energy prices. Iran’s effective blockade of the Strait of Hormuz—a transit point for approximately 20% of global oil and LNG supplies—sent Brent crude surging briefly above US$120/bbl. Gold experienced significant swings driven by the intersection of geopolitics and US policy. After initially rebounding strongly as a safe haven from escalating conflicts, the precious metal corrected sharply later in the quarter due to profit-taking, a stronger US dollar, and tentative ceasefire diplomacy.

Domestically, South Africa experienced a relatively constructive policy backdrop early in the quarter, supported by a steadier currency, softer imported inflation impulses, and a well-balanced national budget that reinforced a steadier fiscal tone. There were also early signs of foreign interest slowly re-engaging with select South African risk assets. However, domestic monetary policy remained restrictive, and the repo rate was left unchanged in March 2026. The SARB’s cautious stance was driven by projections that headline inflation would rise to roughly 4% in the second quarter, exacerbated by fuel inflation expected to exceed 18% following the global energy shock.

Portfolio performance

The Fund’s retail asset class returned -1.87% during the quarter, underperforming the FTSE/JSE Capped All Share Index (CAPI) Index by 141bps. The Resource sector was the key performance contributor during Q1. The Fund’s performance was positively impacted by positions in Glencore (40.42%), AngloGold (16.51%), Goldfields (7.80%), Sasol (89.97%) and MTN (15.31%). Positions in Naspers (-21.96%), Prosus (-24.90%), Harmony (-24.05%), Mr Price (-12.35%), and Impala (-7.20%) detracted from performance.

Portfolio positioning and outlook

All markets remain in a state of flux as we move into the second quarter of the year, but within that uncertainty, we see genuine opportunity. The US dollar has continued to soften, and with the Federal Reserve’s rate-cutting cycle well underway, the environment remains broadly supportive for precious metals. We continue to hold a constructive view on gold and have been deliberately building our exposure to platinum. The platinum market is relatively small in physical terms, which means even modest shifts in investment demand can have an outsized price impact. A dynamic we believe has further room to run for the remainder of 2026.

The escalating conflict in the Middle East, and the direct involvement of Iran, has introduced a meaningful new risk to global energy markets. Iran remains one of the world’s significant oil producers, and any sustained disruption to its output or to the flow of crude through the Strait of Hormuz would tighten global supply considerably. We have already seen early signs of this in energy price volatility, and we are watching developments closely. For South Africa, a sustained oil price spike would complicate the inflation outlook and put pressure on the Reserve Bank to hold rates higher for longer than the market currently anticipates. That said, a resolution or de-escalation, which remains possible, could see oil prices retrace quickly and restore some of the macro tailwinds we had been counting on. We are positioned to navigate both scenarios.

Emerging markets remain the real engine of global growth. China, India and parts of Southeast Asia continue to drive the bulk of expansion, while developed economies, weighed down by high debt, tight fiscal conditions and cautious consumers, struggle to gain meaningful traction. Once we are through the current Middle East tension, we are of the view that financial conditions may stabilise across several emerging economies, and domestic demand firms up. We think that growth story has legs well into the back half of 2026.

The path ahead is unlikely to be without its challenges, and we hold no illusions about the complexity of the environment we are navigating. Elevated volatility is expected to persist through the second quarter and into the remainder of the year, driven by a confluence of geopolitical, macroeconomic and policy uncertainties that are unlikely to resolve quickly.

Against this backdrop, portfolio construction remains disciplined and deliberate. We are maintaining sufficient liquidity to respond decisively when conditions warrant, while ensuring the portfolio remains well-diversified across asset classes, geographies and themes. Flexibility is a core part of our approach, and we are conscious of the need to remain nimble in an environment where the risk landscape can shift quickly.

We remain focused on identifying opportunities with discipline and conviction and are confident that the portfolio is well positioned to deliver meaningful returns for our investors as conditions evolve through 2026.

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Disclaimer

Fairtree Asset Management (Pty) Ltd is an authorised financial services provider (FSP 25917). Collective Investment Schemes in Securities (CIS) should be considered as medium-to-long-term investments. The value may go up as well as down and past performance is not necessarily a guide to future performance. CISs are traded at the ruling price and can engage in scrip lending and borrowing.

A schedule of fees, charges and maximum commissions is available on request from the Manager. A CIS may be closed to new investors in order for it to be managed more efficiently in accordance with its mandate. Performance has been calculated using net NAV to NAV numbers with income reinvested. The performance for each period shown reflects the return for investors who have been fully invested for that period. Individual investor performance may differ as a result of initial fees, the actual investment date, the date of reinvestments and dividend withholding tax. Full performance calculations are available from the manager on request. There is no guarantee in respect of capital or returns in a portfolio. Prescient Management Company (RF) (Pty) Ltd is registered and approved under the Collective Investment Schemes Control Act (No.45 of 2002). For any additional information such as fund prices, fees, brochures, minimum disclosure documents and application forms please go to www.fairtree.com.
Highest rolling one-year return 101.47% (Benchmark: 55.34%) and lowest rolling 1 year return -23.82% (Benchmark: -24.53%) (information to 31 March 2026). The fund has returned an annualised return of 15.42% since inception (November 2011) (benchmark annualised return of 11.86% since inception). The fund’s annualised performance over 1 year is 30.15% (Benchmark: 34.12%). The fund’s annualised performance over 3 years is 16.99% (Benchmark: 19.24%). The fund’s annualised performance over 10 years is 13.36% (Benchmark: 9.74%). Fund returns disclosed are annualised returns net of investment management fees and performance fees. Annualised return is the weighted average compound growth rate over the period measured. Fund investment risk indicator level: Aggressive. Full performance calculations are available from the manager on request. Annualised performance: Annualised performance shows longer-term performance rescaled to a 1-year period. Annualised performance is the average return per year over the period. Actual annual figures are available to the investor on request. Highest & Lowest return: The highest and lowest returns for any 1 year over the period since inception have been shown. NAV: The net asset value represents the assets of a Fund less its liabilities.

This document is confidential and issued for the information of the addressee and clients of Fairtree Asset Management only. It is subject to copyright and may not be reproduced in whole or in part without the written permission of Fairtree Asset Management. The information, opinions and recommendations contained herein are and must be construed solely as statements of opinion and not statements of fact. No warranty expressed or implied, as to the accuracy, timeliness, completeness, fitness for any particular purpose of any such recommendation or information is given or made by the Manager in any form or manner whatsoever. Each recommendation or opinion must be weighed solely as one factor in any investment or other decision made by or on behalf of any user of the information contained herein, and such user must accordingly make its own study and evaluation of each strategy/security that it may consider purchasing, holding or selling and should appoint its own investment or financial or other advisers to assist the user in reaching any decision. The Manager will accept no responsibility of whatsoever nature in respect of the use of any statement, opinion, recommendation, or information contained in this document. This document is for information purposes only and does not constitute advice or a solicitation for funds.