Global investing has rarely felt straightforward, but today’s environment is testing asset managers in new and demanding ways. Geopolitical tension, uneven growth, shifting rate expectations, technological disruption and evolving ESG demands are forcing a rethink not only of where capital should go, but also of how portfolios are built to withstand shocks without sacrificing long-term return potential. As a result, diversification, active management and risk discipline are all being reassessed through a more practical lens.

One of the clearest shifts in asset management is that uncertainty is no longer being treated as a temporary phase. It is increasingly seen as a structural feature of the investment landscape. The old assumption that investors could rely on a simple balance between equities for growth and bonds for protection has come under pressure in a world where inflation shocks, policy divergence and supply-chain fragmentation can reprice multiple asset classes at once.

Fairtree’s Cornelius Zeeman, an equity portfolio manager, says the conventional 60/40 portfolio has come under real strain in recent years as correlations have risen during risk-off periods. Investors therefore need to think more broadly about what diversification really means. Rather than simply holding different asset classes, he argues, portfolios should be built around genuinely uncorrelated sources of risk and return.

SPECTRUM OF EXPOSURES

That more nuanced understanding of diversification is echoed in the fixed-income space. Prescient’s Head of Bonds, Reza Ismail, says: “Investors need to stop treating bonds as a single defensive bucket and instead view them as a spectrum of exposures, each with different sensitivities to inflation, growth, liquidity, fiscal risk and monetary policy”.

In this view, the key question is no longer whether an investor owns bonds, but which part of the fixed-income complex they own, what kind of shock that exposure is expected to absorb, and through which pricing channel it is meant to deliver returns. That is a more demanding framework, but also a more realistic one in today’s environment.

The implication is that diversification has become more conditional and more deliberate. In weaker-growth environments with contained inflation, high-quality duration may still offer protection and capital appreciation. In more inflation-sensitive conditions, inflation-linked bonds or selective short-duration exposures may prove more resilient.

ALTERNATIVE STRATEGIES

In equity portfolios, alternatives, real assets and differentiated strategies are receiving closer attention as investors seek return streams that do not all respond to the same macro trigger. Zeeman says Fairtree sees growing value in alternative strategies such as long/short equity, commodities and real assets alongside traditional long-only portfolios, while also emphasising the importance of diversity of style and thinking within portfolio management teams.

This changing backdrop is also strengthening the case for active management. In calmer periods, passive investing can look efficient and cost-effective. But in volatile markets marked by wide valuation dispersions, policy divergence and rapidly changing fundamentals, asset managers argue that selectivity matters more.

ACTIVE MANAGEMENT

Zeeman says active management is especially valuable when investors need to distinguish between businesses likely to benefit from structural shifts and those likely to be undermined by them. Passive strategies, he notes, buy everything in proportion, including companies that may be overvalued or structurally challenged. In less efficient markets such as South Africa and other emerging markets, he believes that disciplined fundamental research and a willingness to deviate from benchmarks can add significant value.

The same logic applies to fixed income. Ismail notes that passive ownership can be particularly blunt in bond markets because benchmarks are issuance-weighted. “This means they allocate more capital to the heaviest borrowers rather than to the most attractively priced risks,” he explains.

In an environment where central banks are not moving in lockstep, inflation shocks are unevenly transmitted and credit spreads reflect a wider range of issuer and liquidity risks, active management allows investors to distinguish between duration that is being paid for and duration that is not, as well as between credit spreads that genuinely compensate for risk and those that only look attractive.

MORE COMPLEXITY IN SA

For South African investors, this debate carries an added layer of complexity. Local portfolios must navigate domestic structural constraints while still capturing global opportunities. South Africa offers pockets of value, particularly in quality companies with global earnings, commodity exposure and attractive valuations, but it also operates in a context of subdued growth, currency risk and policy uncertainty.

Zeeman says South African investors should maintain meaningful global diversification to access growth markets and provide protection against Rand depreciation, but should not abandon local opportunities altogether. Patient investors willing to do the work, he argues, can still find genuine value on the JSE.

Prescient makes a similar point from the bond-market perspective. It argues that South Africa’s fixed-income landscape is currently being shaped by a combination of improving inflation dynamics, a more credible fiscal trajectory, a new 3.0% inflation target and an economy still operating below its potential, all of which can be constructive for bonds. Yet those positives remain exposed to global oil prices, exchange-rate sensitivity and broader emerging-market risk repricing.

That means local strategy cannot be built on domestic fundamentals alone. It must continuously weigh local valuation and policy credibility against global liquidity conditions, international rate volatility and external tail risks.

AI IS RESHAPING THE INDUSTRY

Technology is another force reshaping the industry, though perhaps with more pragmatism than hype. Asset managers are using data analytics, quantitative tools and AI to improve research, identify opportunities, test scenarios and strengthen risk oversight.

Fairtree says it is investing in alternative data, quantitative screening and risk analytics, while also using AI in company research, earnings analysis and document processing. But the firm stresses that human judgement, business understanding and behavioural discipline remain central to long-term investing.

Prescient’s view is similarly measured. It sees technology’s most useful contribution not as replacing judgement, but as improving inference under noisy and complex conditions. In fixed income, where investors are often dealing with latent variables such as inflation expectations, term premia and liquidity premia, better modelling and scenario analysis can sharpen decision-making. But Ismail also warns that these tools only add value when they are grounded in economic structure and disciplined model governance. AI can strengthen judgement, it suggests, but not replace it.

THEN THERE IS ESG

ESG, meanwhile, is increasingly being treated less as a branding exercise and more as a matter of performance, governance and downside risk. Zeeman says Fairtree views ESG as both a governance and a performance issue, but primarily as a performance consideration, because companies that manage environmental, social and governance risks well tend to be better-run and more sustainable over time. Governance, in particular, remains a critical signal of management quality, capital allocation discipline and long-term investment viability.

In debt markets, Ismail argues, ESG factors matter because bondholders are especially exposed to downside asymmetry. Unlike equity investors, they do not meaningfully participate in upside beyond contractual cash flows, but are highly vulnerable to deterioration in governance, institutional quality and refinancing conditions. Properly understood, ESG is therefore not an optional overlay, but part of orthodox credit and sovereign analysis because it affects the reliability and valuation of promised cash flows.

IT’S CLARITY OVER CERTAINTY

Ultimately, what investors appear to want most from asset managers right now is not certainty, because that is in short supply, but clarity. That means disciplined portfolio construction, sharper differentiation between types of risk, and an ability to remain flexible without becoming reactive. It also means accepting that resilience is not about avoiding risk altogether, but about ensuring that portfolios are appropriately compensated for the risks they do take.

In uncertain markets, that balance between defence and opportunity may be the defining test of modern asset management. Zeeman says one of the biggest mistakes investors still make is extrapolating recent trends too far into the future, while Ismail emphasises that resilience comes from constructing portfolios that do not rely on a single macro forecast. Between those two observations lies the central challenge for asset managers in 2026: staying adaptable, but not unanchored.

Beyond 60/40: rethinking diversification

For years, diversification was often understood as a straightforward balance between equities for growth and bonds for protection. But in today’s environment, that formula is under pressure. Inflation shocks, geopolitical tension, uneven growth and policy divergence are making it harder for traditional asset mixes to deliver the protection investors expect.

Cornelius Zeeman, equity portfolio manager at Fairtree, says diversification now needs to be understood more broadly. Rather than simply holding different asset classes, investors should aim for genuinely uncorrelated sources of risk and return. That is why alternatives, real assets and differentiated strategies are receiving more attention alongside traditional long-only portfolios.

Prescient’s Head of Bonds, Reza Ismail, makes a similar point from a fixed-income perspective. He argues that bonds should no longer be treated as a single defensive bucket, but as a spectrum of exposures with different sensitivities to inflation, growth, liquidity and monetary policy. In other words, the question is no longer just whether investors own bonds, but which bonds they own and what role those holdings are expected to play.

Sanlam Private Wealth adds a third dimension to the debate through alternatives. Reginald Labuschagne, Head of Product and Strategy, says these investments are appealing because they “behave differently across market cycles, offering return streams that are less correlated with equities and bonds”. Sanlam positions its new SPW Global Alternatives Fund as a way of giving qualifying investors streamlined access to global alternative managers and more diversified return drivers over time.

In uncertain markets, diversification is becoming more deliberate and more flexible. It is less about ticking asset-allocation boxes and more about building portfolios that can respond differently to different kinds of shocks.

The more efficient AI gets, the more we’ll use it

Why the sell-off in hyperscaler and software stocks may be missing a 19th-century economic lesson.

In 1865, the English economist William Stanley Jevons observed something counterintuitive: as steam engines became more fuel-efficient, Britain didn’t consume less coal; it consumed far more. Cheaper operation expanded the number of uses, the number of users, and ultimately total demand for energy. This insight, now known as the Jevons paradox, is one of economics’ most durable lessons. And it may be precisely what markets are overlooking today.

Recent months have seen aggressive sell-offs in hyperscaler stocks, such as Microsoft, Amazon, Google and their peers, as well as software platforms exposed to AI spending. The narrative driving the selling is straightforward: if AI models are becoming cheaper and more efficient, revenue and infrastructure spend must follow them downward.

DeepSeek’s emergence, demonstrating that frontier-level reasoning is achievable at a fraction of the prior cost, spooked investors who feared commoditisation.

Falling AI costs ≠ shrinking market

We believe this logic is flawed. When AI inference costs fall dramatically, the addressable market doesn’t shrink; it explodes. Tasks that were previously uneconomical to automate suddenly become viable.

New categories of AI-native software are created. Businesses that couldn’t justify the expense begin adopting tools at scale. More queries, more agents, more workflows, more cloud infrastructure; and all of it expanding simultaneously.

Lower cost per unit, multiplied by vastly more units, produces more revenue, not less.

Recent sell-off = opportunity

Our base case is that demand for hyperscaler infrastructure and AI-enabled software will grow substantially over the coming years, driven precisely by falling costs unlocking latent demand. The companies that provide the picks and shovels of this transformation, such as cloud platforms, foundation model providers and productivity software, are well-positioned to benefit. The recent sell-off, we believe, represents an opportunity rather than a structural turning point. Jevons knew this in 1865. The market is currently pricing in “this time is different”.

Cornelius Zeeman joined Fairtree in 2015 as an Equity Analyst and is currently an Equity Portfolio Manager in the investment team. He began his career in 2012 as a trainee accountant at Deloitte. Cornelius holds a Bachelor of Accounting degree from the University of Stellenbosch. He is also a Chartered Accountant (SA) and a CFA® charterholder.

ABOUT FAIRTREE Fairtree is a leading global investment manager that manages traditional and alternative investment portfolios across all asset classes for local and global clients. Headquartered in South Africa, Fairtree manages R199 billion (as at January 2026) in award-winning, diverse global portfolios. As a trusted investment partner, Fairtree continually strives for investment excellence and to deliver consistent and competitive returns while pursuing its mission of enriching the lives of all our stakeholders. To find out more, visit: www.fairtree.com.

A new gateway to global alternatives

In an environment in which traditional asset classes face increasing volatility, many investors are looking towards alternative investments for new sources of diversification and returns. Against this backdrop, Sanlam Private Wealth has launched the SPW Global Alternatives Fund – a solution designed to add resilience to our clients’ portfolios and enhance long-term growth potential.

Alternative investments – including private equity, private credit and hedge funds – sit outside the traditional listed universe. Their appeal lies in their ability to behave differently across market cycles, offering return streams that are less correlated with equities and bonds.

This diversification can help smooth portfolio performance over time, while also providing access to sectors, strategies and opportunities not available in public markets. In modern portfolios, alternatives are no longer peripheral – they are increasingly a core component in achieving improved risk-adjusted returns.

Yet for many investors, accessing these opportunities has historically been difficult. Minimum investment thresholds are often high, requiring substantial capital to build a diversified allocation across managers and strategies. At the same time, many alternative investments are inherently less liquid, with capital typically committed over longer time horizons.

These constraints have meant that alternatives have largely remained the preserve of institutional and ultra-high net worth investors.

The SPW Global Alternatives Fund has been designed specifically to address these challenges. By pooling capital into a single structure, the fund provides a streamlined access point to a curated selection of leading global alternative managers – removing the complexity, high minimums and administrative burden that would otherwise apply at the individual investment level.

The rationale for launching this fund is straightforward: to enhance the portfolios we construct for our clients. We are continually assessing how to improve long-term outcomes, and a key part of this process is identifying asset classes with differentiated return drivers. Alternatives offer precisely this – exposure to opportunities that respond differently to economic and market conditions, ultimately contributing to more diversified portfolios with improved risk-return characteristics.

Access and liquidity

What sets this solution apart are two defining features: access and liquidity.

On access, the fund opens the door to institutional-grade opportunities that would typically require significant capital commitments. Offshore alternative managers often impose prohibitively high minimums per investment, making meaningful diversification difficult without very large portfolios. By aggregating client capital, the fund enables participation in a diversified portfolio of best-of-breed global managers through a single investment.

On liquidity, the structure has been carefully designed to balance the inherently long-term nature of certain alternative assets with the practical needs of private clients. By blending less liquid exposures such as private equity and private credit with more liquid strategies such as hedge funds, the fund seeks to manage liquidity prudently.

As an evergreen, monthly-priced structure – rather than a traditional closed-ended vehicle – it provides a degree of flexibility while still preserving the integrity of the underlying investments.

The fund itself spans a range of alternative asset classes, including private market opportunities such as private credit, private equity, and infrastructure and hedge funds. Together, these exposures aim to deliver diversified return streams, potential inflation protection and access to an illiquidity premium over time.

For clients, the benefits are clear. As part of a well-structured portfolio, the fund offers access to opportunities typically unavailable through conventional routes, enhanced diversification and the potential for improved long-term outcomes within a single, integrated solution. Importantly, it provides exclusive private client access to an institutional-grade portfolio, available only through Sanlam Private Wealth.

A proven foundation

At Sanlam Private Wealth, we’ve been active in the alternatives space for several years – incorporating private equity, private credit and hedge fund strategies into selected client portfolios. This experience is complemented by the deep expertise of the Sanlam Investments multi-manager, which undertakes rigorous due diligence across investment teams, processes, operations and legal structures.

The SPW Global Alternatives Fund combines institutional-level global manager selection by the multi-manager with our own centralised portfolio construction capabilities, allowing us to build a solution that is both robust and tailored to the needs of private clients.

The fund is available only to qualifying investors, either through an existing managed portfolio with Sanlam Private Wealth or with a minimum investment of US$100 000.

Visit sanlamprivatewealth.com to schedule a private client consultation.

This article is provided for information purposes only and does not constitute financial advice or an offer to invest. Investors should consult their portfolio manager or a licensed financial services provider to determine whether the investment is appropriate for their individual circumstances. Note: The SPW Global Alternatives Fund is a foreign collective investment scheme approved for distribution in South Africa by the Financial Sector Conduct Authority (FSCA) under Section 65 of the Collective Investment Schemes Control Act. The fund is classified as a Qualified Investor Hedge Fund and is only available to investors who meet the applicable eligibility requirements.