Kheir Fund — Q4 2025 manager update

The Kheir balanced strategy ended 2025 at +14.8%, ahead of its blended benchmark by 220 basis points. The team's defensive tilt — overweight consumer staples and short-duration government debt — has carried into early 2026 alongside a measured increase in financial-sector exposure.

A result of that shape is worth decomposing, because in a balanced strategy outperformance of this kind typically comes from allocation discipline rather than heroics. The year rewarded managers who resisted the temptation to chase the most speculative corners of the rally and instead let a smaller number of deliberate tilts compound. The team's view through 2025 was that the market was paying investors adequately for defensiveness — an unusual circumstance, and one that made the trade-off between participation and protection far less painful than it usually is.

The consumer staples overweight is the clearest expression of that view. Staples businesses have historically been among the more resilient parts of the Egyptian equity market through inflationary periods: demand for their products is comparatively inelastic, and the stronger operators have repeatedly demonstrated the pricing power to pass through cost pressure without surrendering volumes entirely. In an economy where the consumer has been squeezed but has not stopped consuming, we regard that combination — durable demand, defensible margins — as the closest thing the equity market offers to an all-weather position.

The fixed-income side of the tilt follows complementary logic. Short-duration government debt in a high-nominal-rate environment offers what we consider the most attractive risk-adjusted proposition available to a balanced mandate: substantial carry, limited sensitivity to rate volatility, and — importantly — optionality. Keeping duration short is not a forecast that rates stay high forever; it is a refusal to pay for a duration bet before the easing cycle is visible, while preserving the flexibility to extend when it is. The position earns while it waits.

The measured increase in financial-sector exposure is the forward-looking element of the book. Banks are, in most markets and most cycles, a geared expression of the domestic economy: they benefit from elevated rates while they persist and from credit expansion when rates eventually fall. Adding that exposure gradually, rather than in size, reflects the team's honest uncertainty about timing — the direction of the next monetary move seems clearer than its date, and a measured build allows the strategy to participate in either sequence without depending on one.

Looking into 2026, the positioning question is when, not whether, to give back some of the defensiveness. A portfolio tilted toward staples and short-duration paper is built for the environment we have been in; it is not the portfolio we would expect to hold unchanged through a full easing cycle. The signals that would prompt rotation are the familiar ones — sustained disinflation, the first credible steps of monetary easing, and evidence that credit growth is broadening. Until those arrive, we think the discipline that produced 2025's result remains the right discipline.