Image supplied The South African Reserve Bank’s latest rate hike is a reminder of how quickly the investment backdrop can change. A shift in inflation expectations, a flare-up in the Middle East, or a change in the interest-rate outlook can move markets before trustees have time to adjust their assumptions.
“I expect volatility; that’s the bottom line,” says Marvin Nair, Investment Solutions Executive at Old Mutual Corporate. “But the issue is not only whether markets move up or down. It is whether retirement savings are designed to keep members exposed to long-term growth while helping protect them from the market shocks that can damage outcomes when retirement savings are accessed.”
For trustees and asset consultants, that is becoming the more important test: whether a portfolio is not only capable of delivering long-term growth but also defendable when market shocks affect member outcomes.
The debate is no longer only about which portfolios can meet long-term return targets. It is about whether those portfolios can manage the path of returns members actually experience when they retire, switch, preserve, transfer or begin drawing an income.
Why 2026 is testing portfolio design
The contrast with 2025 is useful. Last year’s unusually strong market returns showed why growth exposure matters. This year’s more uneven conditions are showing why the delivery of that growth matters too.
Global uncertainty remains a key variable. Middle East conflict has already fed into pressure on oil, gas and fertiliser prices, while equity, bond and currency markets have had to absorb sharp shifts in sentiment. At the same time, the ongoing debate over AI-led growth has reminded investors that uncertainty does not eliminate opportunity. It makes the path to that opportunity more uneven.
“The lesson is not to try and predict every shock – that is a mug’s game. It is to build portfolios that can stay exposed to opportunity while managing how much of that shock members experience, and when,” says Nair.
Growth still matters, but timing decides who benefits
One response to volatility is to reduce growth asset (like equities, alternatives & property) exposure. But in retirement investing, that can create a different problem: members still need portfolios that can keep pace with inflation and support long-term income security.
The challenge is not to avoid risk altogether, but to take it in a way members can withstand. Nair says this is central to the Smoothed Bonus philosophy. “The core of the AGP proposition is maintaining growth exposure throughout market cycles. By staying invested rather than trying to time the markets, the portfolio participates in strong periods in the market as we did in 2025 - a ‘time in the market’ approach that is critical to long-term retirement outcomes.”
A member far from retirement may have time to recover from a market setback. A member close to retirement, switching portfolios, preserving benefits or drawing an income may not. That timing risk matters because market recovery does not help a member who has already exited, switched or begun drawing an income.
Nair says Smoothed Bonus portfolios are particularly relevant where the order and timing of returns matter. “This is why AGP and related smoothed bonus portfolios are so important for Retirement Funds and, notably, living annuity solutions in the retail space. They’re extremely effective at managing sequence-of-returns risk – the risk that poor returns early in retirement permanently impair income sustainability. Steadier outcomes are especially valuable when drawing a regular income.”
The consultant and trustee test: participation with protection
A common mistake is to frame protection and growth as competing objectives. In retirement-fund design, the better question is how to combine them.
Old Mutual Corporate’s Smoothed Bonus range, including the Absolute Growth Portfolios, is designed to participate in market growth while smoothing the return path for members. The difference is in the delivery mechanism.
Rather than passing every market movement directly through to members, the smoothed approach uses a Bonus Smoothing Reserve: gains from stronger periods can be retained and used to support declared returns in weaker periods. Members, therefore, remain exposed to the long-term growth engine, but the return path they experience is deliberately managed.
That underlying portfolio is also diversified across listed and unlisted assets (i.e. alternative assets), broadening sources of return and reducing reliance on listed-market performance alone. The proposition is therefore not “less risk instead of growth”. It is growth with a more deliberate delivery system: diversification helps widen the opportunity set, while smoothing helps manage how members experience the journey.
Nair says the value of the approach is participation with protection. “What sets AGP apart is that it gives you participation in returns – but also protection. With the current 10-15% reserve, the underlying portfolio would have to fall by more than 25% to 30% before an investor sees a negative return. Not even COVID-19 drew portfolios down by that much. If the market downturn is even stronger than we’ve seen in the past, AGP can provide further protection through built-in proportional guarantees.”
For trustees and asset consultants, the question is no longer whether smoothing is a defensive compromise. It is whether a smoother return path can help members stay exposed to growth without leaving them fully exposed to market shocks at the point of exit.
What trustees and asset consultants may want to consider
The first half of 2026 has reinforced a simple point: retirement portfolios need to be judged not only by expected return, but by the journey members are likely to experience. For trustees and asset consultants, the relevant assessment is whether the portfolios they recommend, approve or oversee provide exposure to long-term growth while reducing the risk that members crystallise losses at the point of exit.
The same assessment also needs to consider whether the strategy is suitable for the member journey and defensible under changing conditions. That means looking at the whole retirement investment journey: how returns are generated, how risk is shared, and what members experience when they retire, switch, preserve or begin drawing an income.
In 2026, the question is not growth or protection. It is how to deliver both in a way that improves member-outcome resilience. Growth matters. But members only benefit from it if the investment journey protects them when timing turns against them.
See the whole picture: protect the journey, secure the income. DM
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