TALKING TECHNICALS
GARTH MACKENZIE: Behind the benchmarks
Responsible diversification may explain the underperformance of local funds this year
This has been a difficult year for local fund managers. Most funds have underperformed their benchmarks, and portfolio managers have been having difficult discussions with their clients to explain this underperformance relative to the broader market. This comes on the back of three difficult years in which the JSE’s performance was mediocre. The real issue behind the underperformance has to do with the weightings of stocks in the benchmark indices. Many funds are benchmarked against the JSE all share index or the JSE top 40 index. (These indices generally track each other in performance due to the similar weightings of their index components.)
However, the huge growth in two heavyweight stocks has skewed the performance of the all share and top 40. Naspers and Richemont have a disproportionately large weighting in both indices. Naspers makes up about 22% of the weight in the top 40, thanks to the gains in Chinese Internet giant Tencent, in which it owns a substantial stake. Ri...
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