Fairtree Global Flexible Income Plus Fund Q1 2026 commentary
A stable anchor in a shifting global landscape
Cumulative performance: Long-term wealth creation
The Fund delivered a negative return of -2.89% for the first quarter of 2026. This result is particularly significant when compared to the broader market. During this same three-month period, the Large Cap European Equity Index (SX5E) lost some 3.48% while the Dow Jones Industrial Index (DJIA) lost some 3.19%.
The resilience of the strategy was most evident in March. While the SX5E fell by 9.14% and the DJIA dropped by 5.20%, the Fund’s drawdown was limited to a negligible -2.89%. Over the long term, this defensive stance has allowed the Fund to compound returns effectively, significantly outperforming cash (Barclays 3-month EURIBOR Cash Total Return Index) over one- to seven-year historics.
Table 1: Cumulative performance comparison for Q1 2026
Source: Bloomberg, 31 March 2026
Eliminating performance lumpiness
A core objective of the Fund is to provide a smoother ride for investors by harvesting a highly diversified credit risk premium and eliminating the volatility typically found in concentrated credit or directional interest rate bets. Table 2 shows the performance of the major indices, as well as the Fund benchmark, the iTraxx XOver Total Return Index. It is interesting to note that since Q2 2007, the iTraxx XOver Total Return Index has delivered an almost identical total return, but at less than half the volatility. This goes a long way in confirming our hypothesis that over the long term, credit risk premium can form the cornerstone of a well-diversified portfolio for long-term investing.
Table 2: Total returns and risk, Q2 2007 – Q1 2026
Source: Bloomberg, 31 March 2026
The engine room of resilience
The Fund holds 46 instruments with 365 underlying obligors across a vast array of global and European sectors. By ensuring that each individual exposure is small, we ensure that the portfolio does not rely on the survival of any single borrower. This safety in numbers approach provides a fundamental layer of protection that traditional stock picking and directional income funds often lack. During the March volatility, while global credit spreads widened significantly, this deep diversification ensured that idiosyncratic credit events remained largely immaterial to the overall fund performance. The Fund closely matched its benchmark, albeit with much broader diversification. When one considers that the index currently comprises 75 equally weighted names, the Fund’s broader diversification should provide further defence against defaults within the index. The managers have structurally broadened the positions to hedge against significant losses in the benchmark.
Strategic insulation and the outlook
The benchmark’s and Fund’s ability to navigate the March global risk sell-off was further supported by its structural low beta to the equity markets. The index has displayed a beta to the large-cap European equity index (SX5E) of approximately 0.42 since March 2007, and when one couples this with a correlation of 0.86 and a similar total return over the period, it becomes apparent that the index does provide outsized returns for the risk and correlation that it has delivered.
Looking forward, the recent market repricing has created an opportunity to increase the yield spread of the Fund. As yields have risen globally and credit spreads have widened, the Fund has actively recycled capital into these higher spreads. This proactive management allows the portfolio to capture enhanced spreads that were not available at the start of the year.
The Fund’s yield spread has increased to 4.38% over 3-month EURIBOR, resulting in a pro-forma total yield of 4.45% NACQ. As floating-rate instruments reset at these higher levels, the Fund is ideally positioned to deliver an enhanced and stable income stream. We remain confident that the Fund will continue to serve as a defensive cornerstone for investors, turning market volatility into a long-term yield advantage, which should show outsized returns per unit of risk when comparing them to other risk assets.
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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
The Fairtree Global Flexible Income Plus Fund is registered and approved by the FSCA under section 65 of CISCA. Highest rolling one-year return 20.32% (Benchmark 17.74%) and lowest rolling one-year return -12.84% (Benchmark: -11.56%) information to 31 March 2026. The fund has returned an annualised return of 4.09% since inception (January 2019) (Benchmark: 4.53%). The fund’s annualised performance over 1-year is 3.38% (Benchmark: 5.38%). The fund’s annualised performance over 3-years is 7.25% (Benchmark: 8.40%). The fund’s annualised performance over 5-years is 4.49% (Benchmark: 5.41%). Fund returns disclosed are annualised returns net of investment management fees and performance fees. Annualised return is weighted average compound growth rate over the period measured. Fund investment risk indicator level: moderate. 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. Inception date: January 2019.
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.
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