The Navigator is Anchor’s quarterly review of the major themes affecting markets and gives an overview of our current strategy and asset allocation. Click here for the full document.
The Navigator provides our clients with insight into Anchor’s thoughts on various asset classes and our near-term market outlook.
The renowned financial historian, economist, and investor Peter Bernstein observed that “The fundamental law of investing is the uncertainty of the future.” This insight has been particularly relevant during US President Donald Trump’s second term, and especially so in the wake of the US/Israel strikes on Iran in 1Q26 – an event that lay outside most base case scenarios. In this environment, investment outcomes have been shaped less by forecasts and more by portfolio construction, discipline during periods of heightened volatility, and the ability to adapt to changing circumstances.
Our point is that it is neither practical nor effective to construct portfolios in anticipation of World War III or other highly improbable scenarios. Nor can you construct a portfolio that considers all possible outcomes. Instead, portfolios should be built around clearly defined risk tolerances, long-term objectives and robust diversification principles. Successful investing requires the patience to adhere to this framework, while making measured adjustments as risks and opportunities evolve.
In this context, many investors keep dry powder (cash available for unexpected opportunities) as part of their portfolio construction. During the recent volatility, we have selectively deployed some of that dry powder within Anchor Capital’s portfolios, nibbling at assets that have become unexpectedly cheap. These assets may lose further value in the short term, but for longer time horizons, we have bought good assets at prices that might not otherwise have been available.
Diversification across asset classes has also proven beneficial. We note that investors with exposure to alternatives (including hedge funds, protected equity structured products, physical property, etc.) as a small part of their portfolio construction will have fared better through the past quarter than many who did not. We have, for a while, been supporters of alternative assets with better defensive characteristics during volatile periods. This is a new asset class for most South Africans, even though it commands a significant share of the investment wallet for family offices abroad. We expect most domestic investors will benefit by increasing their exposure to this asset class over time. As interest rates come down through the rate-cutting cycle, we believe that the attractiveness of alternatives will increase.
Anchor Capital is a proponent of balanced portfolios and diversified risks. We maintain that it is crucial for investors to have a long-term plan for what they seek to achieve with their investments, and we think that the year ahead will likely see them move towards their eventual desired outcome. In our view, this is an excellent time to take a pro-risk stance in your portfolio. We advocate that a healthy portion of your investment portfolio should be offshore to leverage diverse opportunities and return profiles while mitigating SA-specific risk.
Finally, we maintain that a meaningful allocation to offshore assets remains essential. The current rand/US dollar exchange rate presents a reasonable opportunity to externalise a portion of your portfolio. Although we expect the rand to hover around these levels over time, we also find that investment opportunities abroad are compelling, enabling access to a broader opportunity set while mitigating domestic-specific risks.
The key to successfully managing your wealth is understanding the changes to the world in which we live and adjusting (when necessary) your investment portfolios accordingly. As a boutique asset manager, we can more readily navigate these twists and turns of global developments. Our team of experienced investment professionals is ideally suited to understanding and reacting to a rapidly changing environment as we pursue exceptional investment outcomes for our clients.
