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.