CADIZ ASSET MANAGEMENT

Global markets were unsettled in March as tensions in the Middle East escalated. After ongoing military strikes by the United States and Israel, Iran moved to shut down the Strait of Hormuz, a key route that carries around 20% of the world’s oil and gas supply. This disruption pushed oil prices above US$100 per barrel and triggered volatility across global markets.

Higher oil prices renewed inflation concerns and reduced expectations for near‑term interest‑rate cuts. Equity markets weakened as investors shifted toward safer assets.

Major central banks responded cautiously. The US Federal Reserve kept interest rates unchanged and signalled that future rate cuts may be delayed. The European Central Bank and the Bank of England also held rates steady, citing ongoing inflation risks and weaker economic growth.

The South African Reserve Bank (SARB) kept the repo rate unchanged in March as rising global oil prices increased the risk of higher fuel, transport and food costs feeding into inflation over time. Although inflation had fallen to 3.0% in February—meeting the SARB’s new target—the Bank revised its inflation forecasts higher for 2026 and 2027 to reflect these risks, while leaving growth expectations unchanged amid a weak domestic economy. The outcome signals that policymakers remain cautious and are likely to keep interest rates elevated until inflation risks clearly subside and expectations remain well anchored.

Bond markets were under significant pressure as rising uncertainty pushed yields higher. South African bonds recorded sharp losses, particularly longer‑dated bonds. The rand also weakened as investors sought the safety of the US dollar, ending March at R17.15/USD.

Looking ahead, global uncertainty, high oil prices and slow local growth point to ongoing market volatility. Despite this, improvements in South Africa’s credit outlook and continued infrastructure progress provide some longer‑term support. We remain focused on disciplined, long‑term investing through changing market conditions.

The Cadiz Money Market Fund continued to meet its mandate and deliver competitive returns during March. Despite the low-interest rate environment, it remains strategically positioned within the short-term investment universe. The portfolio incorporates a targeted allocation to high-quality corporate credit to enhance yield, while maintaining full compliance with mandate guidelines and avoiding undue risk. As a result, the Fund has sustained its outperformance relative to its benchmark, the Alexander Forbes Short Term Fixed Interest (STeFI) Composite.

The Fund’s forward yield stands at 7.64%, reflecting its attractive risk-adjusted profile and its ability to generate steady income in a moderating interest rate environment.

The Cadiz Enhanced Income Fund’s performance benefited mainly from its exposure to nominal bonds, inflation-linked bonds and corporate credit. Government bond yields declined amid strong demand post the national budget speech, while sustained investor appetite for corporate debt contributed to added gains over the month. Trading activity was largely influenced by cash flows, portfolio positioning and the reinvestment of maturing instruments. The Fund remains well positioned to take advantage of opportunities across both the corporate and government bond markets.

The forward yield of the Fund is 8.17%, with a shorter effective duration of 0.65 at quarter end.

The Cadiz BCI Absolute Yield Fund’s performance was curtailed by the volatility experienced in both the nominal bond and inflation-linked bond market in March. Downside risk was mitigated by the Fund’s exposure to money market instruments and corporate credit, as well as its shorter duration positioning. Trading activity focused on deploying available cash, rebalancing the portfolio and reinvesting proceeds from maturing instruments. The Fund remains actively managed, aiming to capture opportunities across markets while maintaining disciplined risk management.

The forward yield of the Fund is 8.36% while duration was shortened to 1.91 at quarter end.

The Cadiz BCI Bond Fund The local bond market was characterised by heightened volatility and rising yields, as investors responded to geopolitical tensions in the Middle East. The Cadiz BCI Bond Fund was well positioned to limit downside risk by maintaining a lower duration strategy, thereby reducing sensitivity to rising yields. The long end of the nominal bond yield curve proved most susceptible to this volatility. The FTSE/JSE All Bond Index (ALBI) returned -6.81% for the month but remains up 19.24% over the past 12 months. The Fund continues to deliver returns in line with its mandate and remains strategically positioned to capture opportunities across the yield curve.

The forward yield of the Fund is 9.03% while duration was shortened to 6.22 at quarter end.