South Africa - Personal
This commentary is for the retail class of the fund.
PERFORMANCE
The Fund returned 9.3% for the quarter and 12.8% for the last 12 months. The long-term performance of the Fund remains pleasing against the benchmark. However, shorter-term performance has lagged both the peer group and benchmark.
For the third quarter, our overweight position in South32 and underweight position in Gold Fields contributed to relative performance, while overweight positions in Exxaro, AECI, and Jupiter Mines detracted.
News flow has been dominated by the continued Middle East conflict and its impact on energy markets, rising interest rates and fiscal concerns and their impact on gold, and strong copper prices on the weak supply and potential US tariffs.
The gold market started the quarter not far off $4 100/oz, climbed to $4 600/oz, before ending the quarter back at c. $4 100/oz. Two competing forces appear to be at play. Market participants are increasingly concerned about government debt levels and a lack of action in dealing with these (either via spending cuts or tax hikes). This was the narrative at play driving gold to $4 600/oz, before the metal’s more traditional driver (interest rates) brought it back down. A Fed hike and higher 10-year interest rates acted as a headwind. Gold is a non-yielding asset and higher yields drive competition for gold. Gold market buying is more normalised, with the absence of frenzied retail ETF buying that saw gold hit c. $5 500/oz earlier this year. However, our view remains that gold equities remain expensive (you can read our detailed analysis here). Gold miner margins remain near all-time highs and materially higher than long run sustainable levels. We have started to see pressure build via material cost increases in the second half of 2026 (10-20% y/y increases in US$ all-in sustaining costs). We have also seen governments starting to look at ways they can harvest more of the margin (for example, the Ghanaian government did not renew the Tarkwa mining lease for Gold Fields). We made limited changes to our gold holdings during the quarter.
On the platinum group metals (PGMs) front, while the longer-term outlook for platinum, palladium and rhodium deteriorates on faster electric vehicle (EV) penetration, current balances are supportive. Minor metals (iridium and ruthenium) are growing in the mix and now make up 15% of a typical revenue basket. These metals are well-demanded and in deep deficits. This makes the overall PGM market (including the minor metals) more balanced and diversified in the longer term. Supply remains challenged. Cash flows are strong and cash is being returned to shareholders, in contrast to previous cycles. After the recent sell-off, value has started to reappear. We bought Impala Platinum towards the end of Q3.
The Middle Eastern conflict continues. While crude oil prices have been fairly contained, all things considered (and it appears that crude oil flows through the Strait of Hormuz are normalising quite quickly), product spreads remain very high. A material amount of Middle Eastern refining capacity remains offline, exacerbated by Ukraine’s strikes on Russian refineries. This has seen product spreads, notably diesel, widen materially. The Fund holds a position in Brazilian producer, PRIO.
Copper prices have continued their steady march higher. The key short-term contributing factor is the potential of US tariffs on imported copper, which has led to US buyers stockpiling record amounts of copper in anticipation. The long-term fundamentals remain attractive based on strong demand applications for electrification (EVs, green energy, data centres), limited substitution and anaemic supply growth. The Fund’s copper-focused holdings are South32 and Glencore.
Within the resources space, we find the most value in the SA-focused diversified mid cap space.
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