Peregrine Capital: AI conviction intact after volatile first half marked by war and oil shock

Peregrine Capital has released its semi-annual investor letter for the six months ended 30 June 2026. The High Growth Fund gained 1.9% and the Pure Hedge Fund gained 1.2%, and the Vision Fund fell 0.6%, while the JSE All Share Index fell 3% over the same period.

Peregrine called the period “once again, eventful”.

Jacques Conradie, CEO of Peregrine Capital, said: “Markets are being shaped by two forces at once – rising geopolitical tension and the fast arrival of human-level machine intelligence – and that both will keep driving rapid change for some time.”

War, oil and a March drawdown

The biggest event of the half year was the US-Iran war, which started on 28 February. Oil prices climbed above $100 a barrel after Iran moved to close the Strait of Hormuz, a route that carries about 15% of the world’s oil.

The spike hit all three of the themes Peregrine had favoured coming into the year – the South African recovery story, store of value assets, and AI, – and the fund posted its largest drawdown on record in March.

During the first month of the conflict, oil spiked above $100 – a level that, if sustained, would materially impact emerging markets like South Africa.

It has since retreated to the high $80s at the time of writing.

The global fuel supply situation has been exacerbated by recent Ukrainian drone strikes on Russian refining capacity, which have further tightened the supply of liquid fuels. Given that South Africa now imports around 65% of its liquid fuel requirements, this is very negative for the country’s balance of payments, inflation outlook and growth potential.

Negotiations between the US and Iran have broken down, hostilities are escalating as we write, and it remains unclear how, or on what timeline, this crisis will be resolved.

AI conviction pays off

Peregrine has written about AI in its letters since 2022, and Peregrine’s position for it only got stronger this year.

It pointed to the rise of agentic AI systems that can plan tasks, use tools and work toward a finished result largely on their own, something already visible in software development.

The firm sees this as a step toward what it calls Recursive Self-Improvement, a feedback loop in which AI systems help build better versions of themselves.

Much of the fund’s gain came from betting on chipmakers early in the year. Exposure to memory and hard-drive manufacturers caught the wave as the SOXX semiconductor index rose more than 100% in the first half.

Peregrine has since sold down a large part of that position and shifted the remainder toward TSMC, which it sees as a steadier long-term holding.

The firm also invests in Meta and Tencent, both of which fell during the period on investor concerns about AI spending.

Peregrine disagrees with that reading. It argues the market is discounting the revenue growth and product gains these companies should see from AI, and believes the stocks look attractive at current prices.

AI and geopolitics

The letter also pointed to a newer risk. Frontier AI is starting to be treated as a national security issue.

In June, a US export control order forced Anthropic to pull its models worldwide, including in South Africa, and access was not restored for about two and a half weeks, until the company agreed to a set of security commitments.

Peregrine said government action is now something investors in this space need to watch closely.

On South Africa, the picture remains unclear.

With oil back in the high $80s and hostilities escalating, the meaningful petrol and diesel price relief we had hoped for is unlikely to materialise in the near term, and fuel prices will continue to put upward pressure on inflation.

Gold and platinum have pulled back from their early year highs but are still trading at levels that support the local economy. A durable resolution to the conflict would change the oil picture quickly – but until then, the oil price remains the single biggest swing factor for the SA macro outlook.

Outlook

Peregrine expects the second half to be just as eventful, with AI progress continuing quickly and the debate shifting from whether governments will step in to how far they will go.

The firm said it is ready for further volatility in semiconductors after taking profits in June, and it remains confident in its larger technology holdings.

“This is an environment of faster change, more government involvement and more volatility, and it rewards patient capital,” said Conradie.

“Investors who share that long-term horizon let us treat volatility as an opportunity rather than a threat.”

IMPORTANT INFORMATION:

Peregrine Capital Collective Investments (RF) Proprietary Limited (“PCCI”) is a registered and approved manager of collective investment schemes in hedge funds. Peregrine Capital Proprietary Limited (“Peregrine Capital”), is an authorised Financial Services Provider (FSP 607) under the Financial Advisory and Intermediary Services Act, No. 37 of 2002 and has been appointed as the investment manager of the portfolios. Collective investment schemes are medium to long-term investments. The value of participatory interests or the investment may go down as well as up. Collective investment schemes are traded at ruling prices and can engage in borrowing and scrip lending. Neither PCCI nor Peregrine Capital provides any guarantee either with respect to the capital or the return of a portfolio. PCCI has the right to close the portfolio to new investors in order to manage it more efficiently in accordance with its mandate. Nothing herein constitutes financial advice, a recommendation, or an offer to buy or sell any security. Performance information and comparisons shown reflects historical returns and is provided for informational and comparative purposes only. Fund performance: Returns are quoted net of fees | Fund performance provided as at 30 June 2026 | Fee class status: Class: A, distributing. Net asset value figures (NAV to NAV) have been used for the performance calculations, as calculated by the manager at the valuation point defined in the deed, over all reporting periods. A schedule of fees, charges and maximum commissions is also available on request from the manager. The rate of return is calculated on a total return basis, and the following elements may involve a reduction of the investor’s capital: interest rates, economic outlook, inflation, deflation, economic and political shocks or changes in economic policy. Past performance is not indicative of future performance. Peregrine Capital High Growth QI Hedge Fund: Performance fees are payable on positive performance using a participation rate of 20%. A high watermark is applied, which ensures that performance fees will only be charged on new performance. There is no cap on the Rand amount of performance fees. Peregrine Capital Pure Hedge QI Hedge Fund: Performance fees are payable on positive performance, in excess of the hurdle, using a participation rate of 20%. A high watermark is applied, which ensures that performance fees will only be charged on new performance. There is no cap on the Rand amount of performance fees. Where periods longer than one year are shown, returns may be annualised. Annualised performance represents the average return per year over the relevant period. Actual annual figures and investment performance calculations are available on request at info@peregrine.co.za.

The performance calculated and shown is that of the portfolio, based on a lump sum contribution on the inception date of the fund. The investment performance for each period shown reflects the net return for clients who have been fully invested for that period. The performance history is contained in the portfolios’ minimum disclosure documents, which are available at www.peregrine.co.za

* Fund Name 
Inception date 
Highest annual return 
Lowest annual return 
Latest 1 year 
Latest 5 years 
Latest 15 years 

High Growth Fund 
Feb-00
71.61%
-16.20%
10.54%
13.80%
16.91%

FTSE/JSE Capped Swix All Share Index
Feb-00
73.00%
-37.59%
19.38%
14.70%
10.98%

ASISA South Africa MA High Equity 
Feb-00
39.47%
-14.75%
12.33%
10.96%
9.37%

** Fund Name 
Inception date 
Highest annual return 
Lowest annual return 
Latest 1 year 
Latest 5 years 
Latest 15 years 

Pure Hedge Fund 
Jul-1998
133.81%
0.59%
7.00%
11.26%
12.27%

ASISA South Africa MA Low Equity 
Jul-1998
40.59%
-3.10%
11.98%
9.88%
8.48%

The calculation of all net returns from 1 February 2000 until November 30 2016 relates to the Peregrine High Growth Fund, prior to its inclusion under CISCA. Thereafter, the data relates to the Peregrine Capital High Growth QI Hedge Fund (“High Growth Fund”). The calculation of all net returns from 1 July 1998 until 30 November 2016 relates to the Peregrine Pure Hedge Fund, prior to its inclusion under CISCA. Thereafter, the data relates to the Peregrine Capital Pure Hedge QI Hedge Fund (“Pure Hedge Fund”). The ‘JSE Capped Swix All Share Index’ referenced is the index from December 2016 to date, before that the JSE All Share TR Index is used

Data to 30 June 2026 I Source: Peregrine Capital, Morningstar, Bloomberg

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