Perpetua’s Global Balanced Fund: a balanced approach to opportunity and risk
Strong performance through disciplined flexibility
Over the five years ended 31 October 2025, the Perpetua Global Balanced Fund (“the Fund”) has delivered a return of 17.7% p.a., an outcome of the portfolio management team’s disciplined approach to portfolio construction and dynamic asset allocation. The Fund blends a strategic long-term asset allocation with tactical shifts informed by top-down macroeconomic factors, while bottom-up stock selection remains a key return contributor.
Successful balanced funds achieve superior risk-adjusted returns for investors by:
- utilising a thoughtful approach to constructing a diversified investment solution;
- incorporating multiple asset classes such as equities, fixed income, commodities, and property;
- balancing the return and risk dynamics of each asset class
Employing a full suite of skilled and disciplined asset allocation, in addition to well-researched fundamental analysis and incorporation of securities within each asset class, has enabled the Perpetua team to maximise opportunities presented through the market cycle to provide clients with superior returns at lower levels of risk when compared to industry peers. Navigating the way in which the asset classes intersect and correlate with each other is also crucial in the management of the Fund.
This article explores the key drivers behind the Perpetua Global Balanced Fund’s superior risk-adjusted performance together with our assessment of key drivers of prospective returns.
Capturing opportunity in market dislocations
Periods of market dislocation have presented meaningful opportunities across asset classes. By maintaining flexibility while exercising conviction, the Fund has been able to take advantages of these opportunities while remaining committed to its capital-protection mandate.
Recently we have been witnessing rising macroeconomic and geopolitical uncertainties which have affected financial markets due to the association with increased risks, thus causing heightened volatility. Market participants often overreact to short-term developments, which leads to excessive price volatility, creating opportunity for long-term investors to take advantage of temporary dislocations in price or value.
One of the most effective strategies to manage risks is diversification in the portfolio. By spreading investments across various asset classes, sectors, and geographies, investors can mitigate downturns in any single area. This doesn’t eliminate risks, but it helps manage them, providing more stable returns over extended periods. Again, it is important to review and adjust one’s portfolio to ensure that it remains balanced with changing market conditions and stays aligned with strategic objectives. This is a more proactive approach to guard against unintended concentration risks whilst not missing out on potential opportunities. This principle is applied through our top-down macroeconomic analysis and bottom-up fundamental security selection, allowing us to assess risks holistically.
This framework allows for dynamic asset allocation and deliberate shifts both within and across asset classes. At an asset class level the Fund reflects a modest shift in positioning. Equities account for just under 65% of the portfolio with a slightly higher exposure to South African equities than global equities. Fixed income instruments represent slightly more than 30% of the portfolio, with two thirds of this in South African fixed income assets and approximately 10% in offshore bonds. The balance is made up of allocations to commodities and listed property.
This thoughtful and conscientious approach of balancing opportunities while managing risks can also be seen within asset classes. For example in fixed income, duration exposure has been moderated and inflation protection has been increased where appropriate. In equities, the focus has been on valuation-backed opportunities, increasing exposure to high-quality businesses tied to a cyclical recovery including a diverse range of financial businesses such as banks, wealth managers, asset managers and stock exchanges, as well as consumer staples and selected consumer discretionary names, with basic materials also making up nearly 20% of the Fund’s equity exposure. Further details with regards to the Fund’s positioning within asset classes is provided below.
1) Fixed income
- South Africa
South African government bonds have consistently offered some the most compelling risk-adjusted yields globally, rivalled only by Brazil. With yields around 10% and inflation below 5%, the fixed income asset class alone has been capable of generating CPI +5% returns. While we were cautious not to extend duration given fiscal risks, we positioned the portfolio in the belly of the curve, a prudent way to capture yield without compromising risk discipline.
Balanced funds must both protect capital when prospective returns are poor and participate meaningfully when opportunities arise. Remaining static in domestic bonds would have missed attractive return opportunities elsewhere — a trade-off we actively managed.
- Global
Having largely stayed out of global bonds due to low and at times negative yields, we started to purchase global bonds in late 2022 when yields were more reflective of the long-term risks. We adopted a conservative duration stance within global fixed income, concentrating exposures primarily in the short end of the US sovereign curve, from Treasury bills out to the five-year area. This positioning provided both income and liquidity, serving as a defensive anchor during periods of rate volatility
At the same time, we implemented small tactical positions in 10-year US Treasuries, taking advantage of temporary overshoots in yields to add convexity – enhancing the portfolio’s ability to gain more when yields fall than it loses when they rise – and diversification. Importantly, our relatively large allocation to 2-to-5-year Treasury Inflation-Protected Securities (TIPS) was a key contributor to performance. This exposure provided real yield support as inflation moderated but remained above long-term targets, reinforcing the Fund’s capital preservation mandate while delivering incremental real returns.
2) Equities
- South Africa
Despite the pessimism surrounding the South African economy and its political environment, the JSE Capped Swix has returned 19% p.a. over the past five years. Several episodes of extreme pessimism towards domestic equities provided rich opportunities — notably during load-shedding in 2023 and ahead of the 2024 elections. At those points, our internal expected returns for South African equities exceeded +20%, from a diversified source of sectors. Positions in banks and retailers were particularly rewarding — for instance, Mr Price (MRP) bottomed on 9x forward earnings in 2023 and subsequently doubled from those levels. We used those episodes as an opportunity to increase exposure to the higher potential return counters. Currently, the Fund maintains meaningful exposure to SA Inc. For example, Banks comprise nearly 20% of equity holdings. At 8–9% dividend yields, these positions alone can deliver required real returns, with scope for growth from an improving credit cycle. As an example of the modest valuations in South Africa, we identify a diversified basket of more than 45 counters, that are trading on less than 10x forward earnings and on attractive dividend yields [Figure 1].
Figure 1: JSE companies trading at sub 10 forward P/E multiples
Source: FactSet, Perpetua Research
- Global
In recent years, significant global dislocations have emerged, particularly in China technology and European financials, where negative sentiment created attractive entry points for long-term investors.
- Chinese technology recovery
In 2022, regulatory concerns drove steep deratings across China’s internet sector. Perpetua took the view that the businesses were being priced as though they were ex-growth, whereas we felt there were still opportunities and adjacent business profit pools for them to monetize. Tencent fell to 13x earnings (HKD 200), and Alibaba to 8x earnings, before subsequently doubling from those levels. Naspers/Prosus traded at an additional 30-40% discount, providing a further margin of safety. These positions contributed strongly to relative performance as fundamentals reasserted themselves.
European financials
Coming out of Covid, European financials screened among the most attractive counters in our universe. Prudential was one such example. Prudential is focused on Pan-Asian health insurance, traded as low as 0.6x embedded value (EV) due to COVID-related mobility restrictions that temporarily halted cross-border health policy sales. Today, the business is more diversified across Singapore, Mainland China, Indonesia and Malaysia, with new business driving EV growth of c.10% p.a. The share price has risen 69% year-to-date yet still trades only around EV — leaving further upside potential. Other contributors from the financial sector over the past year-to-date include St. James’s Place (+65%), Bank of Ireland (+70%), Euronext (+36%) and Brookfield (+29%). Notwithstanding the strong performance, given the state of derating that took place in this sector, we still see upside from current levels.
- Chinese technology recovery
3) Currency and derivative strategies
Among our chief concerns, the higher offshore allocation afforded by the Regulation 28 amendment was that it was taking place at a time when the Rand was particularly weak. We were concerned that Rand strength could impact client returns. To protect against this, we tactically deployed currency options to protect the portfolio against Rand strength. At current levels, we are comfortable reducing our option exposure, as the Rand now trades near the lower end of our fair-value range. We will look to tactically add back to our position should weakness re-emerge, maintaining an active and valuation-driven approach to currency management.
Outlook
While recent dislocations have been rewarding, the global macro backdrop is becoming more challenging. The US economy shows signs of weakening employment and softening consumer demand. The Chinese economy has continued its tepid post-COVID recovery. Tariffs, introduced by President Trump, have created further uncertainty and have muddied the uncertain environment. AI capex is driving economic growth but demand, to which most companies are exposed to, shows signs of weakness. Despite these concerns, US equities trade at 22x forward earnings, well above the 17x historical average. European equities, after a strong 27% YTD rally, are less attractive, though selective opportunities remain. We are finding new opportunities, in traditionally more defensive sectors such as Healthcare— including Novo Nordisk, UnitedHealth Group, and Elevance — as well as Consumer Staples, such as Anheuser-Busch InBev and Diageo.
The recent precious metals rally, initially grounded in strong fundamentals, now appears increasingly technically driven by ETF flows and benchmark chasing. With global valuations extended, coupled with the impact of the precious metals rally on the SA indices, we have introduced option-based protection to guard against overall index declines while retaining core exposure to what we believe to be our more attractively priced selection of shares.
The Perpetua Global Balanced Fund’s success underscores the team’s commitment to disciplined, opportunistic investing, combining strategic steadiness with tactical agility. Our experience, skill and ability to exploit valuation dislocations, exercise prudent risk management and focus on long-term fundamentals provides the platform to deliver sustainable real returns for clients across diverse market environments.