{"id":838654,"date":"2025-09-30T10:53:07","date_gmt":"2025-09-30T08:53:07","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=838654"},"modified":"2025-09-30T10:53:12","modified_gmt":"2025-09-30T08:53:12","slug":"the-safe-portfolio-just-got-risky","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/industry-news\/838654\/the-safe-portfolio-just-got-risky\/","title":{"rendered":"The \u2018Safe\u2019 portfolio just got risky"},"content":{"rendered":"\n<p><strong><em>By Duane Cable, SA Head of Quality, and Sumesh Chetty, Portfolio Manager, Ninety One<\/em><\/strong><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p>For more than a decade, South Africa\u2019s unusually high real yields have offered conservative investors a rare comfort: healthy income returns without the need to take much risk. <\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/ninetyone.com\/en\/south-africa?utm_source=BusinessTech&amp;utm_medium=Article&amp;utm_term=September2025\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>Click here for more info about Ninety One<\/strong><\/a><\/li>\n<\/ul>\n\n\n\n<p>A simple allocation to income strategies often delivered not only capital preservation, but inflation-beating returns. <\/p>\n\n\n\n<p>For many retirees and conservative investors, that tailwind felt like a permanent feature of the market.<\/p>\n\n\n\n<p>But the \u201cfree lunch\u201d of high real yields is fading. The South African Reserve Bank (SARB) has signalled a structural shift: targeting inflation closer to 3% and preparing to cut rates as inflation remains subdued.<\/p>\n\n\n\n<p>That shift, combined with the global repricing of risk, means the safe portfolio of yesterday may no longer be safe tomorrow. <\/p>\n\n\n\n<p>Relying on fixed income alone is like leaning on a ladder that\u2019s slowly being pulled away from the wall.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>The yield cushion is shrinking<\/strong><\/h2>\n\n\n\n<p>At present, local government bonds still look enticing. A 10-year yield of nearly 10% against sub-4% inflation translates into a 6% real return, one of the healthiest cushions in global markets. But it would be na\u00efve to expect this to persist. <\/p>\n\n\n\n<p>As the SARB lowers policy rates, yields are likely to compress across the curve. That may offer investors short bursts of capital gain, but it also locks them into a future of structurally lower real returns.<\/p>\n\n\n\n<p>This poses a dilemma for conservative managers: stretch for credit risk, extend duration, or accept diminished income. <\/p>\n\n\n\n<p>None of these options offers a sustainable solution for retirees or capital-preserving investors facing inflation-linked spending demands, particularly on essentials such as medical costs, which tend to run well above CPI.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>When safe isn\u2019t safe<\/strong><\/h2>\n\n\n\n<p>For many, the word \u201ccautious\u201d still conjures an image of cash, bonds, and capital preservation at all costs. <\/p>\n\n\n\n<p>But a portfolio built only on fixed income may preserve nominal value while steadily eroding purchasing power. <\/p>\n\n\n\n<p>Worse, it risks missing the upside of growth assets precisely when conditions begin to favour them.<\/p>\n\n\n\n<p>Falling rates are historically supportive of equities. Lower borrowing costs, improved liquidity, and still-reasonable valuations suggest that a balanced cautious portfolio cannot afford to ignore equity participation. <\/p>\n\n\n\n<p>Indeed, the most dangerous form of conservatism is clinging to yesterday\u2019s playbook while the regime shifts beneath your feet.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>A smarter form of caution<\/strong><\/h2>\n\n\n\n<p>True caution isn\u2019t about avoiding risk; it\u2019s about taking the right risks. Static allocations or passive building blocks are ill-suited to today\u2019s environment, where correlations spike in stress periods and diversification can vanish when it\u2019s needed most.<\/p>\n\n\n\n<p>This is where multi-asset strategies come to the fore.\u00a0<a href=\"https:\/\/ninetyone.com\/en\/south-africa\/funds-strategies\/funds\/cautious-managed-a-inc-zar-zae000078929?utm_source=BusinessTech&amp;utm_medium=Article&amp;utm_term=September2025\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>The Ninety One Cautious Managed Fund<\/strong><\/a>, for example, deliberately blends quality equities, bonds, and cash in proportions designed to deliver real returns with lower volatility. <\/p>\n\n\n\n<p>Today, it balances roughly a third in equities with meaningful allocations to South African government bonds, credit, and cash, maintaining flexibility to tilt as valuations and fundamentals evolve.<\/p>\n\n\n\n<p>The philosophy is not about making bold macro calls, but about avoiding binary risks. Equities are included for their long-term compounding power, but always with risk contribution in check. <\/p>\n\n\n\n<p>Bonds and cash still play a role, but as part of a coordinated process, not the whole story.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Why it matters<\/strong><\/h2>\n\n\n\n<p>The greatest risk to long-term investors is not volatility, but the behavioural response to it. Many conservative savers sell down at the worst times, locking in losses and underinvesting in growth.<\/p>\n\n\n\n<p>A smoother path \u2013 one that participates in upside but cushions the downside \u2013 helps investors stay invested and on track.<\/p>\n\n\n\n<p>As South Africa transitions into a lower-yield world, conservative investors face a stark choice: cling to yesterday\u2019s definition of \u201csafe,\u201d or embrace a more forward-looking version of caution. <\/p>\n\n\n\n<p>The first risks slow erosion; the second offers a more resilient path to real wealth preservation.<\/p>\n\n\n\n<p>In our view, the safe portfolio just got risky. It\u2019s time to rethink what cautious really means.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>For more than a decade, South Africa\u2019s unusually high real yields have offered conservative investors a rare comfort: healthy income returns without the need to take much risk. <\/p>\n","protected":false},"author":57,"featured_media":838656,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10459],"tags":[19703],"class_list":["post-838654","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-industry-news","tag-ninety-one-2"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/838654","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/57"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=838654"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/838654\/revisions"}],"predecessor-version":[{"id":838657,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/838654\/revisions\/838657"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/838656"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=838654"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=838654"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=838654"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}