<\/p>\n
You can also listen to this podcast on iono.fm here.<\/p>\n
SIMON BROWN: I\u2019m chatting with Chetan Ramlall. He is portfolio manager in the Systematic Solutions team at STANLIB Asset Management. Chetan, I appreciate the time, as always.<\/p>\n
The JSE is often described as a resources market, and at times I suppose maybe it is, but is that still a fair conception or is it perhaps a bit outdated? And if it is, what does our market more accurately look like these days?<\/p>\n
CHETAN RAMLALL: Yes, Simon. I think increasingly that perception is becoming outdated. And as you rightly say, I think if you look historically our market has at times been very much dominated by the Resi. If you go back all the way to the late \u201970s \u2013 so even around that 1978 and early \u201980s period \u2013 for context resources made up around 68% of our market.<\/p>\n
Read:
What shone, and what could still shine on the JSE
Beating the index in 2026
Gold and resource funds dominate latest PlexCrown rankings<\/p>\n
SIMON BROWN: Oh, wow.<\/p>\n
CHETAN RAMLALL: But I think since then, over the last 30 years there\u2019s definitely been a broadening out. So if you look at how our banks have done, our financials, consumer staples, industrials, et cetera, there has been this great broadening out.<\/p>\n
But once again, as you say, it is cyclical and it moves through time. Currently in fact, with the massive run-up in gold that we\u2019ve seen, miners have dominated the market. So at the moment I think the Resi is sitting at about 30% of the All\u00a0Share. But once again, that does vary through time, just as the market evolves.<\/p>\n
SIMON BROWN: Yes, I get that. Markets are, in their different parts, cyclical. Also, in a recent article you wrote, you were talking around how the JSE actually might be more diversified at sector level, yet we still see concentration perhaps at company level. That distinction is that we\u2019ve just got some big stocks in our market \u2013 and that\u2019s not even unique to us for that matter.<\/p>\n
CHETAN RAMLALL: Exactly. It\u2019s quite an interesting sort of interplay, where the JSE has definitely become more diversified across the range of sectors that it represents. But what we\u2019ve seen is that it remains quite concentrated in a relatively small number of companies.<\/p>\n
So for context, the 10 largest shares in our market account for roughly half of the market value. That just shows you how sort of concentrated we are at a stock level. And once again, this changes over time and leadership changes over time.<\/p>\n
If you go back to 2002, that was when the modern All Share Index was set up.<\/p>\n
Very interestingly, there\u2019ve only been 24 unique companies that have appeared in the Top 10 since 2002, so that actually gives you a flavour of the relatively small number of names that do tend to lead.<\/p>\n
Read:
Size matters: The growing risks of concentration
Can the JSE Alsi continue to outperform the S&P 500?<\/p>\n
SIMON BROWN: I would never have guessed the number was that small. I would have thought maybe a hundred or so.<\/p>\n
You made the point that the concentration risk should be assessed through sort of underlying return drivers. Worry less about the sectors, worry what that return driver is, and then plug that into portfolio construction.<\/p>\n
CHETAN RAMLALL: Yes, this is so crucial, Simon, because I think it\u2019s very easy to get fixated and simply look at the sector labels \u2013 Resi, Financials, Staples, et cetera. And then by looking at those labels, you think that you are diversifying away your risk as an investor and you\u2019re sort of broadening out your risk exposure. But actually, you need to go deeper.<\/p>\n
When you go deeper it\u2019s to actually understand what is driving these companies. For example, companies that are in one sector \u2013 or among, it might seem on the surface, different sectors \u2013 you might find that they all have underlying exposure to the rand, or to Chinese demand, or to the commodity cycle.<\/p>\n
So in essence you are actually doubling up on risk instead of diversifying risk, as an example. So investors need to start assessing diversification across several dimensions.<\/p>\n
That\u2019s not simply sector exposure, but rather think in terms of currency sensitivity, think in terms of geographical earnings, macro risk \u2013 and then also the relationships between these risks.<\/p>\n
So I think genuine diversification really comes from holding different sources of return, not simply focusing on sector labels. I think that\u2019s really the key.<\/p>\n
Read:
Small wins, big returns
SA\u2019s market outdoes rating agencies\u2019 outlook
Volatility, uncertainty hit JSE returns in first half of 2026
JSE tops R1bn profit in record-breaking year for markets<\/p>\n
SIMON BROWN: I get that, absolutely. I like that. You mentioned China and obviously there\u2019s Prosus on the one side, there\u2019s Richemont on the other, and you could put an iron ore company in the middle \u2013 they\u2019re different sectors, the same driver.<\/p>\n
If we look ahead, if the JSE is going to continue to evolve with different leadership \u2013 not as much as I had thought, but still there. What does remain consistent in that process? I imagine your systematic approach is having that process perhaps as important as anything.<\/p>\n
CHETAN RAMLALL: Yes. So I think most important, because as we\u2019ve seen \u2013 and as you\u2019ve seen \u2013 different cycles of the market play out, the market itself changes. And I think especially now, more than ever, the importance of having an investment framework and a solid process to make decisions is actually what\u2019s needed.<\/p>\n
So it\u2019s almost finding that anchor in the sea of change that keeps unfolding because that idea of having a framework, Simon, is so crucial, especially when there\u2019s so much noise in the system.<\/p>\n
And that attempt at separating signal from noise becomes ever more important because, as we\u2019ve seen with social media and all of the noise that\u2019s going on in the news, it\u2019s becoming increasingly difficult to know what\u2019s real, valuable information and data, and what\u2019s simply fluff, noise, and froth in the system.<\/p>\n
Read:
Prosus, gold, platinum stocks mask shocking performance of \u2018SA Inc\u2019
Will JSE-listed ETPs top R300bn by year end?<\/p>\n
So I think understanding leadership in terms of what drives returns \u2013 and companies will change \u2013 but having that disciplined and adaptable investment process is really the key at the heart of it.<\/p>\n
SIMON BROWN: I get that, absolutely. You\u2019re a portfolio manager in the Systematic Solutions team, and that is your process, that is your framework. But I\u2019m imagining there\u2019s still some human judgment; you\u2019re just trying to sort of make that an easier process for the individual.<\/p>\n
CHETAN RAMLALL: Yes, I think at this point \u2013 especially if you look at how the whole technology theme is playing out at the moment with AI and all of these amazing technologies, Simon \u2013 now more than ever the skill of the human manager is paramount.<\/p>\n
By no means is human judgment being pushed aside, but rather by having a solid framework and having a systematic approach of making decisions, when you combine that with the excellent tools and technology we have, in a sense it enhances and strengthens what we can do as skilled human managers.<\/p>\n
That\u2019s really the heart of why a systematic approach creates a structured and consistent way of assessing companies; that\u2019s really it. Why that\u2019s so important is that it ties in very neatly to the risk-management dimension.<\/p>\n
Read:
Balancing AI efficiency with human expertise in asset management
Bank CEOs\u2019 AI obsession collides with warning from watchdogs
Recent advancements in artificial intelligence models<\/p>\n
You\u2019ll find that with managing these types of portfolios, building strategies that do outperform over the long term, these really become multidimensional problems. If you look at all of the noise, like I mentioned, you\u2019re trying to find companies that perform well while simultaneously accounting for various risk dimensions and risk factors. It\u2019s actually a near-impossible task to just do in your head or to do in a sort of heuristic way.<\/p>\n
That\u2019s where the need for sophistication comes in. Human judgment is paramount in terms of designing these processes, and it\u2019s part and parcel of the process. But it doesn\u2019t mean we can\u2019t use these sophisticated tools that are now at our disposal.<\/p>\n
SIMON BROWN: And just using the best parts of both \u2013 whether that be the tools or whether that be the humans.<\/p>\n
We\u2019ll leave it there. Chetan Ramlall, portfolio manager in the Systematic Solutions team at STANLIB Asset Management, appreciate the time.<\/p>\n
#drives #returns #JSE<\/p>\n","protected":false},"excerpt":{"rendered":"
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