South Africans have watched Rassie Erasmus challenge convention, shuffle combinations and make the uncomfortable call when the evidence points somewhere unexpected.Willem le Roux, Head of Multi-Asset Solutions at Sanlam Investments Multi-Manager, believes portfolios need that same willingness to adapt.
“Rassie doesn’t field the biggest names and hope they click. He builds a side that works as a system. That is a useful way to think about a portfolio,” he says. “An asset class or investment portfolio can look excellent on its own and still be the wrong fit for the strategy on the whole. Our job is to understand what each part can deliver, and how the parts behave together when markets are calm, volatile or under pressure.”
That thinking is reflected in the way Sanlam Investments Multi-Manager is positioning its multi-asset solutions. It’s using the full equity allocation permitted under Regulation 28 across South African, developed-market and emerging-market territories. Le Roux says that should not be read as a one-way bet on shares.
“More attacking does not have to mean reckless. A balanced rugby side can attack because it knows where the cover is. Equity exposure works the same way: it has to sit within the context of the whole portfolio, including the defensive positions, alternative return drivers, time horizon and the way those pieces interact.”
The old playbook is not enough
For decades, the diversification formula was straightforward: equities drove growth, while bonds provided income and helped steady the portfolio when shares sold off. That relationship still matters, but it has become less reliable.
South African government bonds are a great example. Local investors may think of them as fixed income, while global investors often treat them as emerging-market risk assets. When appetite for risk dries up, local shares and bonds can be sold at the same time, just when investors are counting on them to behave differently. Even traditional safe-haven developed market bonds can produce similar episodes when government debt is higher, inflation risk is persistent, and interest-rate expectations are changing.
Le Roux adds, “Bonds still have an important role, but we need to understand that role and contribution. They may not be the last line of defence but can be akin to a more conservative substitute flyhalf controlling territory and tempo to close out a game.”
A pie chart is not a game plan
Le Roux says genuine diversification is about owning assets for different reasons, then understanding how each exposure is likely to behave alongside the rest.
“Every holding has to earn its jersey. It must justify the return potential, risk, cost and complexity it brings. A portfolio can look beautifully diversified on paper and still be driven by one or two underlying risks quietly calling the shots.”
Multi-management allows investment teams to deliberately combine return drivers, time horizons, styles, regions, and asset classes. It also allows the combinations to change when markets do.
“The client’s long-term goal stays the same, but the route towards it may not. Rugby is no longer a 15-person game, but the eight-person bench is crucial in adapting to conditions. Markets change, relationships between assets change, and the portfolio has to be able to change too.”
Where diversification can still do real work
For South African investors, the rand can provide some cushioning. When global risk rises, the currency often weakens, which can soften the fall in offshore assets once returns are translated back into rand. Le Roux says that effect is still useful, although smaller than it used to be. He expects South Africa’s move to a 3% inflation target to support a more stable exchange-rate environment over time, leaving the rand as more of a short-term buffer than a lasting boost to offshore returns.
Alternative assets can add return drivers that don’t move in step with listed shares and bonds. Private debt, private equity, venture capital, renewables and infrastructure can also open the door to opportunities that public markets don’t capture.
But smoother reported returns need to be read carefully. Private assets are not priced every day, so some of the underlying risk is less visible between valuations.
“Alternatives are not a silver bullet, and private assets do not become low risk because the line on the chart looks smoother,” says Le Roux. “However, when they’re selected well and managed properly, they can improve the overall mix and make the journey less bumpy. That matters because investors experience markets month by month.”
Play the long game
Le Roux says the point of diversification is to create a better balance between risk and return over the period that matters to the client.
“One of Rassie’s strengths is that he doesn’t treat every match as a referendum on the whole plan. He can take a setback, learn from it and keep building towards the bigger prize – the Rugby World Cup. Investors can benefit from that same discipline. An over-fixation on returns from month to month may take one’s eye off the ultimate prize of financial freedom. The Springboks succeed by keeping their focus on the bigger picture, and investors are often best served by doing the same.”