Over the past few years, the South African and US stock markets have become dominated by a few large-cap stocks.
Such concentration bodes ill for investors in terms of diversification. The concentration risk, according to Old Mutual Investments, is making investors look elsewhere to diversify their portfolios.
Changes to Regulation 28 of the Pension Funds Act in 2022 mean local prudential investors can now switch a larger chunk of their assets offshore and dodge the concentration risk in domestic markets. However, dumping local cash in concentrated markets abroad, especially in the US, may now seem inopportune.
