Fairtree BCI Income Plus Fund Q1 2026 commentary
A stable anchor in a shifting global landscape
The first quarter of 2026 was defined by a sharp risk-off environment in March. While the year began with optimism, geopolitical shocks led to a significant repricing of global assets. For an income-focused investor, these moments test the structural integrity of a portfolio. During this turbulent period, the Fairtree BCI Income Plus Fund performed as designed, providing capital stability while traditional bond and equity markets experienced significant drawdowns.
Cumulative performance: Long-term wealth creation
The Fund delivered a positive return of 0.38% for the first quarter of 2026. This result is particularly significant when compared to the broader market. During this same three-month period, the South African All Bond Index (ALBI) declined by 3.31%, and the Top 40 Equity Index (TOP40TR) fell by 0.64%.
The resilience of the strategy was most evident in March. While the ALBI fell by 6.83% and the TOP40TR dropped by 10.85%, the Fund’s drawdown was limited to a negligible -0.22%. Over the long term, this defensive stance has allowed the fund to compound returns effectively, significantly outperforming cash (STeFI) over the three, five, and ten-year horizons.
Table 1: Cumulative performance comparison 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 illustrates the discrete annual returns of the Fund compared to other asset classes.
The data highlights the lack of lumpiness in the Fund’s return profile. While the ALBI and TOP40TR Equity Index are prone to significant annual fluctuations and drawdowns, such as the negative returns seen in Year 7, the Fairtree BCI Income Plus Fund has delivered consistent, positive performance across varying market cycles.
Table 2: Discrete one-year returns (10-year history) to 31 March
Source: Bloomberg, 31 March 2026
Returns are presented as discrete rolling 12‑month returns over the period shown, with all periods ending on 31 March. Returns represent actual annual performance for each period and are not cumulative or annualised.
The engine room of resilience
The consistency evidenced in the tables above is the direct result of our commitment to radical diversification. We believe that true risk management is not found in predicting defaults, but in engineering a portfolio that is indifferent to them.
The Fund holds 158 instruments with 416 underlying obligors across a vast array of global and local 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.
Strategic insulation and the outlook
The Fund’s ability to navigate the March bond sell-off was further supported by its structural low modified duration. By removing sensitivity to interest rate swings, the portfolio remained protected while long-term bondholders saw significant capital erosion.
Looking forward, the recent market repricing has created an opportunity to increase the yield of the Fund. As yields have risen globally and credit spreads have widened, the fund has actively recycled capital into these higher rates. This proactive management allows the portfolio to capture enhanced spreads that were not available at the start of the year.
The Fund yield spread has increased to 2.51% over 3-month JIBAR, resulting in a pro-forma total yield of 10.39%. As floating-rate instruments reset at these 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.
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Disclaimer
The highest calendar year return was 13.06%, and the lowest calendar year return was 5.58% (information as of 31 March 2026). The fund has returned an annualised return of 9.00% since inception (12 March 2014) (Benchmark return: 8.34% since inception).
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. The information in this two-pager is provided as a general summary only. Past performance is not necessarily a guide for future performance. Fund investment risk indicator level: conservative. Actual investment returns are available on request. The investment Performance is for illustrative purposes only. The investment performance is calculated by taking the actual initial fees and all ongoing fees into account for the amount shown; and income is reinvested on the reinvestment date.
Boutique Collective Investments (RF) (Pty) Ltd (“BCI”) is a registered Manager of the Boutique Collective Investments Scheme, approved in terms of the Collective Investments Schemes Control Act, no 45 of 2002 and is a full member of the Association for Savings and Investment SA.
Collective Investment Schemes in securities are generally medium- to long-term investments. The value of participatory interests may go up or down, and past performance is not necessarily an indication of future performance. The Manager does not guarantee the capital or the return of a portfolio. Collective Investments are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees, charges and maximum commissions are available on request. BCI reserves the right to close the portfolio to new investors and reopen certain portfolios from time to time in order to manage them more efficiently. Additional information, including application forms, and annual or quarterly reports can be obtained from BCI, free of charge.
Performance figures quoted for the portfolio are from Morningstar, as at the date of this document for a lump sum investment, using NAV-NAV with income reinvested and do not take any upfront manager’s charge into account. Income distributions are declared on the ex-dividend date. Actual investment performance will differ based on the initial fee charge applicable, the actual investment date, the date of reinvestment and dividend withholding tax.
Investments in foreign securities may include additional risks, such as potential constraints on liquidity and repatriation of funds, macroeconomic risk, political risk, foreign exchange risk, tax risk, settlement risk as well as potential limitations on the availability of market information.
Boutique Collective Investments (RF) Pty Ltd retains full legal responsibility for the third-party named portfolio.
Although reasonable steps have been taken to ensure the validity and accuracy of the information in this document, BCI does not accept any responsibility for any claim, damages, loss or expense, however, it arises, out of or in connection with the information in this document, whether by a client, investor or intermediary. This document should not be seen as an offer to purchase any specific product and is not to be construed as advice or guidance in any form whatsoever. Investors are encouraged to obtain independent professional investment and taxation advice before investing with or in any of BCI/ Manager’s products.
Access the BCI Privacy Policy and the BCI Terms and Conditions on the BCI website (www.bcis.co.za). A portfolio that derives its income primarily from interest-bearing instruments in accordance with Section 100(2) of the Act, whether the yield is historic or current, as well as the date of calculation of the yield.
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