Fairtree SA Equity Prescient Fund Q2 2026 commentary
Market overview
The FTSE/JSE All Share Index (ALSI) decreased by 2.36%, and the FTSE/JSE Capped All Share Index (CAPI) decreased by 2.36% during the quarter. Industrials and Financials increased by 4.8% and 8.0%, respectively, while Resources decreased by 18.8% The rand appreciated by 3.3%, ending the quarter at R16.39 against the US dollar.
During Q2, Bonds increased by 7.9% and Cash returned 1.7%. The MSCI Emerging Market Index increased by 24.1% (in USD), outperforming the MSCI World Index, which increased by 13.8% (in USD). The MSCI South Africa Index decreased by 1.9% (in USD).
Over the quarter, Iron ore decreased by 8.5% to US$93.4/t, and Brent crude oil decreased by 24.1%, ending at US$73.0/bbl. Copper increased by 8.9% to US$13348.9/t. Gold decreased by 14.4% to US$4008.0/oz, Platinum decreased by 20.5% to US$1552.5/oz, and Palladium decreased by 18.1% to US$1212.1/oz, while Thermal coal decreased by 2.6% to US$107.5/t.
The VIX Index (Volatility or “Fear” Index) decreased by 34.9% to 16.5 during Q2.
Economic overview
The quarter opened with a fragile ceasefire announcement between the United States and Iran, but negotiations collapsed mid-month, leaving energy markets highly unsettled. Geopolitical developments in the Middle East continued to dominate the macro landscape. While signs of progress in US-Iran negotiations periodically triggered brief market rallies, alternating military escalations and inconsistent political messaging kept inflation expectations, global yields, and oil highly volatile. Despite this, Brent crude experienced a sharp correction during the quarter, due to a ceasefire extension and the gradual return of shipping traffic.
Throughout the quarter, global equity markets remained heavily dependent on and resilient through a powerful, AI-driven technology rally. In April, this thematic strength lifted technology benchmarks to record highs in several international markets, continuing to support US and Asian tech indices through May. By June, data-centre investments remained robust, validated by strong memory demand and positive semiconductor guidance, though cracks and growing fragility began to appear beneath the headline AI theme.
Early in the quarter, South Africa faced persistent domestic supply chain pressures, elevated transport costs, and food distribution friction brought on by global oil shocks. However, the rand displayed relative resilience amid intermittent optimism over a ceasefire. The South African Reserve Bank (SARB) implemented a 25-basis-point rate hike, intensifying the financial strain on local rate-sensitive sectors. The domestic macro environment experienced a positive turn in June as consumer price data provided an encouraging surprise. May headline CPI accelerated to 4.5% year-on-year, which came in below consensus expectations due to a sharper-than-anticipated moderation in food price inflation that effectively offset elevated domestic fuel costs.
Portfolio performance
The Fund’s retail asset class returned -6.71% during the quarter, underperforming the FTSE/JSE Capped All Share Index (CAPI) by 435bps. The Financial sector was the key performance contributor during Q2. The Fund’s performance was positively impacted by positions in Firstrand (12.91%), MTN (19.51%), Capitec (16.68%), Mr Price (17.22%) and Standard bank (9.01%). Positions in Gold Fields (-27.55%), Impala (-28.01%), Sasol (-28.27%), Northam (-30.64%), and AngloGold (-18.16%) detracted from performance.
Portfolio positioning and outlook
Our resource positions (most notably in precious metals), Gold Fields, Impala, Sasol, Northam and AngloGold, fell between 18% and 30%, and that alone explains most of our relative underperformance. We view this as a function of near-term price volatility within a longer-term thesis that we believe remains intact, and we have used the weakness to add to these positions rather than reduce them. We acknowledge, however, that the timing of this cycle has proven more difficult to call than we previously anticipated. Financials and Retail, led by FirstRand, MTN, Capitec, Mr Price and Standard Bank, provided a meaningful offset.
The de-escalation in the Middle East has already reversed much of the recent gain in Brent crude, and we expect this to be the more significant swing factor for the coming quarter than any single equity position. A lower and more stable oil price would ease the inflation outlook for South Africa and reduce the likelihood that the Reserve Bank needs to hold rates higher for longer than currently priced. That combination, a softer oil price and a central bank with more room to move, is the macro tailwind we are positioning for, while remaining mindful that the situation could still reverse.
Against that backdrop, our conviction in gold and platinum is unchanged. A continued Federal Reserve rate cutting cycle and a softer US dollar remain broadly supportive of the precious metals complex over the coming quarters. Platinum, given the limited size of the physical market, remains the position where we expect the clearest asymmetry between modest investment demand and price response through the remainder of 2026.
Beyond the immediate quarter, the more durable growth story continues to sit with emerging markets. China, India and parts of Southeast Asia are expected to continue driving the bulk of global expansion, while developed markets remain constrained by high debt levels, tight fiscal conditions and cautious consumers. As Middle East tensions continue to ease, we expect financial conditions across several emerging economies to stabilise further and domestic demand to firm progressively through the second half of the year.
We expect volatility to remain elevated through the third quarter, shaped by the pace of geopolitical de-escalation, the trajectory of Federal Reserve policy, and the response of domestic policy makers to a shifting inflation outlook. These dynamics are unlikely to resolve in a straight line.
We are positioning the portfolio accordingly. We are maintaining sufficient liquidity to act decisively as opportunities emerge, and the Fund remains well diversified across asset classes, geographies and themes. This flexibility is deliberate and reflects our view that the risk landscape over the next two quarters is more likely to reward a nimble approach than a fixed one.
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Disclaimer
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 30 June 2026). The fund has returned an annualised return of 14.59% since inception (November 2011) (benchmark annualised return of 11.46% since inception). The fund’s annualised performance over 1 year is 12.11% (Benchmark: 19.38%). The fund’s annualised performance over 3 years is 14.75% (Benchmark: 17.84%). The fund’s annualised performance over 10 years is 12.64% (Benchmark: 9.39%). 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.
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