The first quarter of the year began on a constructive footing, supported by moderating inflation, resilient global growth and expectations of a gradually more accommodative monetary policy environment. Developed economies continued to demonstrate underlying strength, while inflation trends broadly moved closer to central bank targets, reinforcing confidence in the disinflationary path.

This positive backdrop was disrupted later in the quarter, however, by a sharp escalation in geopolitical tensions in the Middle East. The resulting surge in oil prices introduced renewed volatility across global markets, complicating the inflation outlook and prompting central banks to adopt a more cautious stance on the timing and extent of interest rate cuts.

Locally, South Africa entered 2026 with improving macroeconomic conditions. Inflation remained contained within the South African Reserve Bank’s (SARB) target range, with prints around 3%–3.1%, while inflation expectations continued to decline—supporting the credibility of the SARB’s policy framework. Investor sentiment improved during the early part of the quarter, underpinned by stable inflation, a firmer rand and growing expectations of a more accommodative policy path.

That said, the late-quarter global oil shock introduced new risks to the domestic outlook. Higher fuel costs and currency sensitivity have shifted expectations toward a more cautious monetary trajectory, reinforcing the importance of disciplined portfolio positioning in a more volatile environment.

Against this backdrop, Orion Investment Managers experienced sustained growth across our portfolios and fund range. As always, our emphasis remains on disciplined capital allocation, valuation-led decision-making and consistent execution of our investment philosophy. Our objective is unchanged: delivering strong and predictable real returns for our clients over the long term.

Our investment businesses

The local asset and investment management businesses owned by Orion are:

• Cadiz Asset Management – Specialist local fixed income
• Starfunds.ai – Rule-based quantitative management
• Accorn Investment Management – Long-only equity and multi-asset funds
• Palmyra Asset Management – Local equity, property and multi-asset strategies
• Capita Asset Management – Long-only equity and multi-asset solutions
• Investin Asset Management – Long-only equity and multi-asset funds

Asset allocation – Q1 2026

Local asset classes

Key positioning:

• Bonds (Duration):
  Duration has been shortened relative to the All Bond Index.
• Inflation-linked Bonds:
  Remain unattractive; zero exposure maintained across multi-asset portfolios.
• Property (Neutral):
  Exposure maintained at 3% in stable mandates and 5% in balanced mandates.
  While fundamentals remain broadly supportive—particularly if the SARB easing cycle resumes—valuations have normalised, limiting near-term upside. The evolving inflation outlook also warrants caution.
• Equities (Marginally Positive, Selective):
  We retain a marginally positive stance on South African equities, with selectivity across sectors remaining critical.

Global Asset Classes

• Global Cash (Underweight):
  We remain underweight global cash, as return prospects remain modest.
  Equities continue to offer superior long-term return potential relative to cash and bonds.
• Global Bonds (Neutral, Short Duration Bias):
  We maintain a neutral view on global bonds, with portfolios positioned shorter than the Bloomberg Global Aggregate Index due to asymmetric upside risks to yields.
• Global Equities (Neutral with Structural Preferences):
  We maintain current exposure levels across stable and balanced mandates.

Key positioning:

• • Preference for developed markets over emerging markets
  • Structural overweight to the United States, reflecting:
    • Earnings durability,
    • Balance sheet strength,
    • Leadership in technology, AI and healthcare.

US corporates continue to offer a compelling combination of growth, innovation and profitability.

Conclusion and house view summary

As we move into Q2, our positioning reflects conviction in:

• Nominal bonds (local and selective global exposure),
• Developed market equities, particularly the United States,
• A neutral weight to domestic equities, with selective sector positioning,
• Continued caution in cash and inflation-linked bonds,
• Moderated property exposure following the recent rally.

Our portfolios remain anchored in diversification, valuation discipline and real return generation, ensuring alignment with long-term client objectives.

Asset allocation continues to be the primary driver of portfolio outcomes. Our quarterly Strategic Asset Allocation (SAA) review process ensures that portfolios remain aligned with the consolidated house view, informed by both macroeconomic insight and bottom-up valuation analysis.

We remain disciplined, pragmatic and optimistic, with an unwavering commitment to delivering consistent real returns for our clients.

On behalf of the entire Orion Investment Managers team, I would like to thank Warwick for its continued support and the business invested in our strategies throughout Q1 2026. We look forward to further strengthening this partnership over the remainder of the year.

I wish everyone in Spirit Invest a successful and productive second quarter.

Adrian Meager
Managing Director & Chief Investment Officer
Orion Investment Managers