High-Level Attribution Overview
| Asset Class / Sector | Contribution | Commentary |
| Local Equities | ▲ Positive | The FTSE/JSE All Share Index posted a solid return of 10.2% in rand terms for the quarter, with broad-based strength displayed across local equity sectors, with platinum group metals (PGMs) and gold miners being standout performers. |
| Local Fixed Income | ▲ Positive | South African bonds delivered strong returns over the quarter, as a broad-based decline in yields drove bond prices higher across the curve. Returns were especially pronounced in bonds with longer-dated maturities |
| Global Developed Equities | ▲ Positive | Global equities produced strong returns over the second quarter. While US equities rebounded from their early-April selloff, international developed markets remain ahead year-to- date. |
| EM Equity | ▲ Positive | Emerging Market (EM) equity allocations remained resilient, gaining 12.2% in USD over the quarter, supported by continued strong performance from Latin America and Korea. Easing US- China trade and a weakening US dollar were a particular tailwind for emerging market equities over the quarter. |
| Cash | — Neutral | Cash (+1.9%) remained a stable investment option, highlighting the relatively attractive yields available on conservative allocations. |
Legend: ▲ = Positive Contribution | ▼ = Negative Contribution | ▬ = Neutral Impact
This summary reflects general trends observed across asset classes during the quarter and is not indicative of individual client portfolio results.
What helped performance
- Developed Market equities rebounded sharply, with the S&P 500 up +10.9% in local currency and international developed market equities returning +11.6% for the
- South African equity allocations delivered positive returns for the The local equity market was supported by broad-based gains, with notable increases in gold and platinum prices over the quarter.
- Funds with significant allocations to Emerging Markets produced positive returns, as strong equity markets coupled with a weaker US dollar contributed to performance this
What detracted from performance
x Rand strength/US Dollar weakness provided a headwind to global allocations this quarter as the unit strengthened against most currencies.
x Funds with exposure to the Energy of Healthcare sectors detracted from overall performance this quarter, as these were the worst performing sectors over the quarter.
Market Overview
The second quarter of 2025 began with extreme volatility, marking one of the most turbulent starts to a quarter in recent history. On April 3 and 4, US equities – as measured by the Morningstar US Market Index – fell nearly 11%, representing the third-worst two-day decline since 2002. The immediate trigger was the announcement of new tariffs, which reignited fears of a broader global trade slowdown and sent risk assets sharply lower. As we noted to clients at the time, overreaction is never the right reaction. Market volatility is an inherent feature of investing and cannot be eliminated – only managed. Meanwhile, global fixed income continued to contribute meaningfully, with the broad US bond market (measured by the Bloomberg US Aggregate Bond Index) up nearly 4% for the year. At current yield levels, bonds are once again contributing meaningfully to total return, offering not only downside protection but also real, consistent income, reinforcing their strategic role in a well-balanced portfolio.
In other economic news, Finance Minister Enoch Godongwana delivered South Africa’s third revised budget (“Budget 3.0”), reflecting both spending cuts and lower revenue projections following a downward revision in GDP growth. Notably, government debt is projected to rise to 77.4% of GDP by 2025/26 – the highest level since 1994. Treasury now expects the economy to grow by +1.4% in 2025, down from the
+1.9% forecast in March, citing global headwinds and the knock-on effects of US trade policies under President Trump. Furthermore, the South African Reserve Bank (SARB) cut its key interest rate by 0.25% to 7.25%, as widely expected following a pause in March. The SARB noted that the decision is aimed at supporting a weakening economy amid a more favourable inflation outlook.
Looking Ahead
The second quarter of 2025 reaffirmed the importance of diversification as a key defense against uncertainty. US equities had a meaningful rebound during the quarter, international developed and emerging markets remain ahead on a year-to-date basis, underscoring the benefits of maintaining broad, global exposure across asset classes. Locally, both equity and bond markets posted strong returns over the quarter. However, rising political uncertainty, particularly surrounding tensions within the newly formed coalition government, and the looming expiration of the 90-day tariff pause in July, have introduced renewed policy risk. These factors could adversely affect investor confidence and create volatility in local markets during the second half of the year. Looking ahead, periods of heightened market volatility are likely to remain a feature rather than an exception in 2025. However, attempting to predict or react to every short-term move often leads to suboptimal investment decisions. The most effective approach is to recognise volatility as a normal part of investing, ensure that portfolios remain aligned with long-term objectives, and adjust only when warranted by changes in the investment plan, not by day-to-day market noise.
High-Level Attribution Overview
| Asset Class / Sector | Contribution | Commentary |
| Developed Market Equities | ▲ Positive | US equities rebounded from their early April selloff. From a sector perspective, Technology and Communication Services were key contributors. Meanwhile, Energy and Healthcare were the quarter’s worst performers.
Looking at developed markets (ex-US), they have continued to outpace the US. |
| Emerging Market Equity | ▲ Positive | Emerging market equity allocations remained resilient, gaining 12% in USD over the quarter, supported by continued strong performance from Latin America and Korea. In addition, the easing US-China trade and a weakening US dollar were a tailwind for emerging market equities over the quarter. |
| Global Fixed Income | ▲ Modest Positive | Global fixed income continued to contribute meaningfully, with the broad US bond market up nearly 4% for the year. At current yield levels, bonds are once again contributing meaningfully to total return, providing both downside protection and consistent real income. |
| Cash | — Neutral | Cash remained a stable investment option, highlighting the relatively attractive yields available on conservative allocations. |
Legend: ▲ = Positive Contribution | ▼ = Negative Contribution | ▬ = Neutral Impact
This summary reflects general trends observed across asset classes during the quarter and is not indicative of individual client portfolio results.
What helped performance
- Developed Market equities rebounded sharply, with the US Market up 11% in local currency and Developed ex-US returning 13% for the quarter.
- Funds with significant allocations to Emerging Markets produced positive returns, as strong equity markets coupled with a weaker US dollar contributed to performance this
What detracted from performance
x US Dollar weakness provided a headwind to global allocations this quarter as the unit weakened against most currencies.
x Funds with exposure to the Energy of Healthcare sectors detracted from overall performance this quarter, as these were the worst performing sectors over the quarter.
Market Overview
The second quarter of 2025 began with extreme volatility, marking one of the most turbulent starts to a quarter in recent history. On April 3 and 4, US equities – as measured by the Morningstar US Market Index – fell nearly 11%, representing the third-worst two-day decline since 2002. The immediate trigger was the announcement of new tariffs, which reignited fears of a broader global trade slowdown and sent risk assets sharply lower. As we noted to clients at the time, overreaction is never the right reaction. Market volatility is an inherent feature of investing and cannot be eliminated – only managed. Meanwhile, global fixed income continued to contribute meaningfully, with the broad US bond market (measured by the Bloomberg US Aggregate Bond Index) up nearly 4% for the year. At current yield levels, bonds are once again contributing meaningfully to total return, offering not only downside protection but also real, consistent income, reinforcing their strategic role in a well-balanced portfolio.
Beyond the short-term volatility, market dynamics are beginning to shift in more structural ways. The so- called “Magnificent Seven” – a group of mega-cap technology and growth companies that have dominated returns in recent years – are no longer moving in unison. Through June, four of these seven companies have underperformed the broader market, with Tesla (-21.3%) and Apple (-17.9%) firmly in or near bear market territory. This divergence highlights a broadening of market leadership beyond the tech sector. Industrials, utilities and financials are among the top-performing US sectors this year—a clear shift from the tech-giant leadership of recent years. This shift isn’t limited to the US. International markets have outpaced US equities meaningfully, with the Morningstar ex-US Index outperforming the Morningstar US Market Index by over 13% year-to-date, one of the widest midyear gaps in decades. In addition, Emerging Markets have also surged, rising to 14% year-to-date. Despite the strong returns this year, most overseas markets continue to trade below Morningstar analysts’ fair value estimates, providing opportunities for both diversification and potentially higher returns.
Looking Ahead
The second quarter of 2025 reaffirmed the importance of diversification as a key defence against uncertainty. US equities had a meaningful rebound during the quarter, international developed and emerging markets remain ahead on a year-to-date basis, underscoring the benefits of maintaining broad, global exposure across asset classes. Looking ahead, periods of heightened market volatility are likely to remain a feature rather than an exception in 2025. However, attempting to predict or react to every short- term move often leads to suboptimal investment decisions. The most effective approach is to recognise volatility as a normal part of investing, ensure that portfolios remain aligned with long-term objectives, and adjust only when warranted by changes in the investment plan, not by day-to-day market noise.
