Markets don’t need a recession to deliver unpleasant surprises.
Sometimes all it takes is a single geopolitical flashpoint, a supply shock, or a policy surprise to reprice risk across equities, bonds, currencies and commodities in a matter of hours.
Learn more about Laurium Capital’s hedge fund range.
We view the current conflict in Iran as highly material primarily through the energy and inflation channels.
If the market starts to price a prolonged disruption to key routes such as the Strait of Hormuz, higher oil prices quickly flow through to inflation expectations, interest-rate assumptions and risk appetite.
For South Africans, the impact is also felt via fuel and diesel prices, which feed into transport costs and the broader inflation basket.
What has stood out in early 2026 is not only the number of “unknown unknowns”, but how quickly they arrive.
Even when markets look calm on the surface, uncertainty can be building underneath.
That’s why we think the key question for investors isn’t “What will happen next?” but rather “Is my portfolio built to cope if I’m wrong?”
Importantly, we believe investors should avoid knee-jerk decisions in periods of market stress.
It’s difficult in the moment, but markets have historically recovered from shocks and drawdowns.
Staying calm, sticking to a well-constructed plan, and ensuring you have the right mix of growth assets and protection can be the difference between achieving long-term objectives and locking in temporary losses.
When volatility rises, investors often rediscover an uncomfortable truth: the biggest risk to long-term outcomes is not a bad year, but a deep drawdown that changes behaviour or significantly impairs compounding (especially for retirees drawing an income).
In those environments, hedge funds can play a useful role because they are not limited to the single return driver of “the market must go up”.
Importantly, South African hedge funds, including Laurium’s Market Neutral and Long Short strategies, have been tested through multiple market crises—including the Global Financial Crisis, the Covid shock, and the inflation-driven sell-off of 2022—and have demonstrated their ability to protect investors’ capital by experiencing much lower drawdowns than traditional long-only portfolios.
The reason is structural: managers can actively reduce net market exposure, hedge risk, and use short positions to dampen downside when markets fall sharply.
Hedge funds are designed to improve portfolio efficiency: participating in upside when opportunities are available, while aiming to reduce the depth of drawdowns when conditions deteriorate.
Many hedge funds are managed with an absolute-return mindset and are designed to prioritise downside risk.
That can mean giving up some upside in sharp rallies.
The more relevant test is whether the allocation improves the probability of meeting the investor’s goals across a full cycle—particularly through drawdowns, when poor sequencing and investor behaviour do the most damage.
In 2026, the investment conversation is shifting from “Where can I earn the highest return?” to “How do I stay invested when the path gets rough?”
From our perspective, that’s where hedge funds earn their place: by broadening the toolkit available to manage risk, diversifying return drivers, and helping investors pursue more resilient outcomes.
Article from: BusinessTech
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