For South Africans, investing has always been a global game. This is not only because Regulation 28 of the Pension Funds Act has allowed investors to include up to 45% offshore assets in their portfolios for the last three years.
It is also because South Africa’s economy and stock market are small compared to the rest of the world. Furthermore, the JSE itself is becoming increasingly global in nature. About 54% of JSE Capped SWIX constituents earn the bulk of their income from outside South Africa.
We believe there is a strong case for following a global investing approach to portfolio management. This approach is more likely to deliver good outcomes for clients over the long term. Assessing available opportunities, both locally and globally, requires adopting a global mindset.
In a digital world, should geographic borders still define your thinking?
Typically, local fund managers follow one of three approaches to managing offshore assets. They either partner with a global manager for the offshore component, use a passive exchange-traded fund (ETF) or index tracker, or build offshore products in-house. We believe there is a strong case for the in-house approach as part of a comprehensive global investing approach.
Firstly, given the increasingly global nature of South Africa’s stock market, even local investment teams must be able to assess stocks without being constrained by borders.
Secondly, a global investing approach produces positive outcomes in two distinct ways. It helps avoid investing in local companies simply because they are index constituents when global peers are better positioned to deliver for investors. For example, a global energy producer like Shell may outperform JSE-listed Sasol. This approach also allows the inclusion of top-performing local companies in global portfolios. Glencore, Northam Platinum, and Discovery Holdings serve as prime examples.
Lastly, technology has increasingly levelled the playing field. A desk in London or New York does not guarantee investment success any more than a desk in Cape Town precludes it. The track records of the PSG Global Equity Sub-Fund USD and PSG Global Flexible Sub-Fund USD highlight this point. Both funds are in the top quartile of their respective categories over 1, 3, 5, and 7 years, for the period ending 30 September 2025 (Source: Morningstar Direct. Full fund details are available here).
True active managers are rare, even globally
We have written extensively about why current trends mark only the beginning of profound changes in global markets.
Markets are poised to behave differently in the years ahead. Consequently, return drivers in portfolios will also differ from those of the past. Old portfolio diversification and protection strategies may no longer work efficiently as the correlations underpinning them begin to break down. Investors will therefore require fresh approaches.
For example, we have already seen rising correlations between US bonds and equities. In a higher-inflation environment, this dynamic is likely to continue. However, even in global markets, managers tend to align with consensus views and index weights. They follow tried and tested strategies that worked in the past. Increasingly, evidence shows this approach may struggle to continue rewarding investors.
We believe our 3M investment process is well placed to secure sources of return for investors. It emphasises finding overlooked quality trading at a discount to inherent value. This approach also adds exceptional value to client portfolios over the long run. One reason is the diversification benefits it brings. Our portfolios differ considerably from the index. They have delivered strong returns for clients, with return drivers that look materially different from those of typical portfolios.
Differentiated positioning
Significant discount to market – Attractive growth – Active – Diversified
Sources: Bloomberg, MSCI, PSG Asset Management, top 15 portfolio holdings as at 30 September 2025, valuation (median PE ratio 2025) and median EPS growth based on Bloomberg consensus estimates, or PSG Asset Management where unavailable.
More importantly, we believe these portfolios are well-equipped to continue delivering strong returns, even as the macro environment evolves unpredictably.
In conclusion
We continue to find many investment opportunities in unloved and overlooked sectors trading at attractive valuations, even as indices hover near record highs.
Looking ahead, partnering with an active manager who has a proven track record of delivering across market cycles will become increasingly important. When it comes to global investing, a parochial mindset has no place. An integrated global investing approach will be crucial for achieving investment success locally and globally.
 |
 |
| Philipp Wörz | Fund Manager | mail me | | Justin Floor | Head | Equities | mail me | |
| | PSG Asset Management | | |
