Following aggressive rate-cutting cycles in 2024 and 2025, 2026 was shaping up as a year of recalibration for asset managers, with divergence in major developed markets creating a fertile environment for active management.
Trevor Garvin, head of multi-management at Nedgroup Investments, explains that local asset managers were adopting a more selective and diversified regional approach.
“Managers were tilting towards Europe and selected emerging markets, including South Africa, as they offered more attractive valuations than the US, and were benefiting from a weaker dollar and rate-cutting cycle prior to the war in Iran.”
However, since the conflict started, managers have grown more concerned about energy import vulnerability in Europe and parts of Asia.
“Brent crude oil is consistently trading above $100/barrel, and supply remains constrained through the Strait of Hormuz, which is inflationary and complicates rate cut hopes,” says Garvin.
“These factors necessitated a shift in focus to resilience and inflation protection, rather than a pure duration-led market rally relying on a falling interest rate environment.”
As the current market shock may result in stagflation, Garvin highlights the need to invest in quality cash flow businesses with strong pricing power.
“Regionally, the US remains important and is more cushioned by energy self-sufficiency, but we continually reassess relative tilts, such as the US versus Europe, as the macro environment changes daily.”
As significant new developments come to light every day and global uncertainty remains high, Varshan Maharaj, Allan Gray Frontier Markets Equity Fund portfolio manager, says preparation, not prediction, remains key to guiding investment decisions.
Focusing on value has proven a better strategy than trying to predict outcomes that are often counterintuitive
— Varshan Maharaj
“In this environment, focusing on value has proven a better strategy than trying to predict outcomes that are often counterintuitive,” says Maharaj.
“As such, we are maintaining a watchlist of attractive businesses and investing when prices drop sufficiently below our fair value estimates.”
For example, the oil price spike has provided additional support to energy-related holdings — Maharaj highlights Nigeria’s Seplat Energy, which produced an 89% total return in US dollars over one year and 558% over five years (not annualised) to the end of Q1 2026.
“As there is a material risk that it may take significantly longer than expected to resolve supply issues in the oil market, Seplat Energy provides a good hedge to this and trades on seven times our estimate of normal free cash flow.”
Kazakhstan’s NAC Kazatomprom has also benefited as more countries turn increasingly positive on nuclear energy as a safe and cost-effective power source.
“An improving demand outlook coupled with disciplined supply dynamics from producers creates an attractive supply–demand outlook for uranium,” says Maharaj.
“This is reflected in the uranium price and the NAC Kazatomprom share price, which provided a total return of 152% over one year and 326% over five years (not annualised) in US dollars to the end of Q1 2026.”
Due to the potential shift in interest rate trajectories from the inflationary impact of higher oil prices, Maharaj says the large sell-offs in precious metals stocks — the big winners in 2025 — have also created opportunities.
“We see opportunity in precious metal miners, such as AngloGold Ashanti and Zimplats. Many of the bullish drivers for the gold price remain intact, supporting demand for the ultimate reserve asset.”
From an asset allocation perspective, Garvin highlights how the Iran shock reinforces the argument for diversifying across less correlated asset classes.
“Sustained oil prices above $100 a barrel and energy supply shortfall discussions highlight why commodities, infrastructure and inflation-linked cash flows matter in portfolio construction.”
In this regard, alternative assets have become critical portfolio diversifiers for fund managers seeking idiosyncratic returns to hedge against prevailing risks. As such, asset managers are increasingly pivoting towards private markets and unconstrained hedge fund strategies.
“Local managers are increasing allocations to hedge funds, private credit, infrastructure and private equity, both locally and offshore,” says Garvin.
“Infrastructure remains compelling due to inflation-linked cash flows and long-term contracted revenues, especially in energy and logistics, while hedge funds are benefiting from greater market volatility and dispersion, allowing skilled managers to generate alpha with lower market beta.”
As the conflict continues to create market dislocations, Maharaj says researching new markets for investment ideas will provide opportunities to find more high-quality businesses trading at attractive prices.
“Interest in the frontier universe among global investors remains low, which is contributing to the large disparity in valuation multiples between companies in these markets and comparable companies in developed markets. We continue to use this backdrop to buy good businesses at discount prices.”
