Finweek English Edition - - INVESTMENT -

the JSE Alsi of 11.5%. We are thus see­ing a large-cap bull run at the mo­ment. This is both wor­ry­ing and re­as­sur­ing. It’s wor­ry­ing in that any change in the re­turns of these five shares will put di­rect pres­sure on the mar­ket’s per­for­mance. It is re­as­sur­ing in that there are lots of op­por­tu­ni­ties for in­vestors to avoid this by find­ing smaller, un­der­val­ued com­pa­nies that are able to bet­ter weather a nor­mal­i­sa­tion of global in­ter­est rates. The stock-pick­ing skills of in­vestors will come to the fore when this bull mar­ket ends.

Un­til then, ac­tive man­agers try­ing to avoid the con­cen­tra­tion risk in the largest shares by mar­ket cap­i­tal­i­sa­tion are likely to un­der­per­form the in­dex. Given that we do not be­lieve that mar­kets can be timed, we think this un­der­per­for­mance risk is a risk worth tak­ing. Those who don’t have the stomach for short-term un­der­per­for­mance are likely to suf­fer from a hang­over af­ter the party.

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