Investment opportunities for South Africans in 2025

Schroders said investors need to look beyond recent equity market winners to achieve their 2025 return objectives and identified private markets, non-US equities, and bonds as good investments.

Schroders’ CIO Johanna Kyrklund and private markets CIO Nils Rode explained this at the Schroders Crystal Ball 2025 Investment Outlook event.

Kyrklund said there are return opportunities to be had, even after the gains of 2024. 

However, she said investors may need to look beyond recent winners. Equity investors have grown used to a small number of large companies powering the stock market’s gains. 

“That pattern was already changing during 2024, and we think there is potential for markets to broaden out further,” she said.

“Different sectors and different regions may start to appear more attractive. An active approach will be needed to avoid overexposure to previous top performers and to capture new return opportunities as they emerge.”

For example, Kyrklund said equity market valuations do not look expensive outside the US. 

In addition, positive growth and lower interest rates should benefit corporate earnings, which drives shares over the long term.

South Africa is set to see an interest rate cutting cycle of around 100 basis points, with two 25 basis-point cuts already implemented.

While this may be less relief than many consumers hoped for, it is set to benefit the country’s equity markets.

Despite upcoming interest rate cuts, Kyrklund said Schroders continues to view bonds favourably. 

This is because they remain a good source of income generation and provide portfolio diversification in terms of ensuring resilience amid ongoing geopolitical uncertainties and the significance of decarbonisation as a key investment theme.

“Meanwhile, and despite political changes in the US, we expect the trend towards decarbonisation to persist, with private market investments playing a significant role in driving the global energy transition,” Rode said.

Rode said Schroders anticipates 2025 to be an attractive environment for new private market investments, offering the potential for both return and income generation as several cycles align favourably. 

These include the private market fundraising, technological disruption and economic cycles.

“Simultaneously, considering ongoing geopolitical tensions and the elevated risks of escalating conflicts, the role of private markets in providing portfolio resilience remains crucial,” he said. 

Earlier this year, Stonehage Fleming private markets partner Richard Hill said ultra-high-net-worth (UHNW) South Africans increasingly turn to private market assets as the public market shrinks.

Hill said private market assets are set to more than double to $12 trillion by the end of 2029.

This growth is being driven by ongoing public company delistings, a shift in institutional and UHNW investor interest towards private investments and a double-digit decline in analyst coverage of public companies.

According to Stonehage Fleming’s research, private markets have significantly outperformed the public markets, with initial capital invested multiplying by 10.4 times between 2000 and 2024.

In this context, ‘private markets’ encompasses private equity, growth equity, real assets, and real estate.

Investments in private equity investments, the most significant component of private markets, multiplied by 15.9 times, growth equity 14.4 times, real assets 11.1 times, and real estate 7.6 times.

Nils pointed to the small/mid-buyout and venture capital spaces as being the most attractive in private equity. 

Real estate is also expected to enjoy a good vintage year, while the private debt premium remains attractive across several strategies.