Evolving – not necessarily holding

 

Manty Seligman
Director – Asset Management

 

 

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The shifting giants of the S&P 500 and JSE:  Why GTC’s Multimanager Strategy is built for the long haul

Over the past three decades, the makeup of the world’s major stock indices has changed dramatically.  The top 20 companies by market capitalisation on both the S&P 500 and the JSE All Share Index have evolved in response to technological innovation, economic transformation, and shifting consumer behaviour. 

This dynamic environment presents a clear message to investors: long-term success requires more than a ‘buy and hold’ approach.  It demands strategic oversight, adaptability, and professional guidance – hallmarks of GTC’s multimanager investment philosophy.

A tale of two indices: From industrial titans to tech trailblazers

In the early 1990s, the S&P 500 was dominated by industrials, oil majors, and consumer staples.  Names like General Electric, ExxonMobil, and IBM were synonymous with stability and market leadership.  Fast forward to today, and when compared with 30 years ago, the leaderboard is unrecognisable.  Technology companies now command the top spots with NVIDIA, Microsoft, Apple, Alphabet (Google), and Amazon dominating with a combined value of nearly USD 17 trillion, making up almost a third of the entire S&P 500 Index.  To put that into rand terms, those five companies are worth almost R300 trillion.  The JSE in its entirety is worth some R22 trillion…

These firms have capitalised on the rise of artificial intelligence, cloud computing, and digital platforms – sectors that were either in their infancy or non-existent 30 years ago.  NVIDIA, only listed in the dot com boom in 1999 is now the world’s single most valuable business, with significant growth prospects at the forefront of the AI evolution.

A similar transformation has unfolded on the Johannesburg Stock Exchange.  In 1995, the JSE’s top companies were largely mining houses and financial institutions – Anglo American, Gold Fields, Sasol, and Standard Bank among them.  While some of these names remain, the dominance of mining and finance has significantly diminished.  Today, the JSE Top 40 includes a broader mix of financial services, retail, and tech-adjacent firms.  Capitec, for example, has emerged as a major banking force, while legacy players like SAB and Liberty Holdings have been restructured or absorbed.

The buy-and-hold illusion

The (1990’s) idea of buying a few blue-chip stocks and holding them indefinitely has long been romanticised and held out as an evergreen investment strategy.  Our parents did this successfully, as did their parents.  History however shows that even the most iconic companies can – and do – fall from grace.  General Electric, once the world’s most valuable firm, has undergone years of restructuring and progressive relative downsizing and is now positioned on the same ladder in position number 35 or 40.  Sasol, once a JSE heavyweight, has faced significant headwinds in recent years.  Investors who held these stocks without reassessing their positions would have significantly underperformed the broader market.

This is why GTC advocates for active portfolio oversight.  Markets evolve quickly.  Your investments, and perhaps more particularly your investment strategy too needs to undergo the necessary transformation.

Index evolution vs. investor inertia

Both the S&P 500 and the JSE All Share Index are dynamic.  They rebalance regularly, removing underperformers and adding rising stars.  This built-in adaptability helps indices remain relevant and reflective of the broader economy.

In contrast, individual investors who buy and hold specific stocks are exposed to company-specific risks: management missteps, regulatory changes, technological disruption, and shifting consumer preferences.

Without professional oversight, these risks can quietly erode long-term returns.  It is with these investment obstacles in mind that GTC adopts and manages a multimanager approach, blending active and indexation strategies.

We believe that no single investment style holds all the answers.  Active management is usually people-centric.  Changes in a portfolio’s construction are usually based on a fund manager’s calculated belief in a certain strategy.  On this basis two different funds with completely different objectives can simultaneously be successful – or not.  An indexation approach to investing has far less human involvement, relying on large quantities of data being processed, analysed, and allocated to computer driven checks and balances, resulting in an investment outcome.  The human inputs and decisions made in active portfolio construction come at a higher cost than the machine learning processes of indexation investing which results in a passive investment process.

So, whilst it is true that indexation is a cheaper form of investing than active management it is only the net investment returns – after the cost of management has been deducted – that counts.

Our multimanager strategy blends the strengths of both active and indexation approaches to optimise risk-adjusted returns.  Our active managers bring deep market insight, identifying undervalued opportunities and adjusting portfolios in response to macroeconomic trends.  Meanwhile, our indexation specialists provide cost-efficient exposure to broad market segments, ensuring diversification and consistency.

This hybrid model allows us to diversify across investment styles, sectors, and geographies.  It also allows us to respond more nimbly to market shifts and emerging opportunities.  GTC can maintain discipline through structured rebalancing and oversight.  By continuously monitoring manager performance and reallocating as needed, GTC delivers a robust, adaptive investment solution tailored to the needs of both our private clients as well as our many retirement fund members.

Behavioural discipline and rebalancing

One of the greatest threats to investor success is emotion.  Panic selling during downturns and euphoric buying during rallies can lead to poor outcomes.  History is full of empirical evidence of the errors of this type of investment behaviour.   GTC provides the behavioural discipline needed to stay the course, helping clients always make rational decisions, most importantly when markets are turbulent.

Any portfolio construction depends on a pre-determined plan which includes the decisions of how much of a style, sector, industry, or any contributing factor to contain within the portfolio.  As markets move, these allocations change.  Those decisions that were accurate will see those allocations increase, whilst incorrect allocations see those allocations decrease.  Rebalancing is required in the portfolio in the form of both strategic and tactical decisions.

 

Tactical rebalancing is a short-term investment strategy whereby portfolio weightings are adjusted to take advantage of changing market conditions.  This form of rebalancing differs from strategic rebalancing, which follows fixed long-term targets.  By increasing exposure to undervalued assets and trimming overvalued ones, the portfolio aims to enhance returns without exceeding risk limits.  This approach relies on timely market insights, disciplined execution, and ongoing monitoring.  When applied carefully, tactical rebalancing adds agility and resilience to the investment strategy.  Strategic rebalancing ensures that what is written on the box is what is contained inside.

Thematic and opportunistic investing

GTC’s multimanager platform also enables access to thematic strategies – targeting long-term trends such as clean energy, cybersecurity, and demographic shifts.  These themes often fall outside traditional sector classifications and require nuanced understanding.  Our managers identify emerging opportunities and construct portfolios that capture sustainable growth.

A compass in a shifting market

The past 30 years have shown that market leadership is fluid.  Companies rise and fall, sectors rotate, and innovation disrupts incumbents. In this environment, relying solely on a static portfolio is like navigating a stormy sea without a compass.  GTC is that compass.  Our team of experienced professionals help clients adapt to change, manage risk, and pursue long-term financial goals with confidence.

 

The S&P 500 and JSE All Share Index are mirrors of economic evolution.  From oil rigs to algorithms, from gold mines to fintech, these indices have transformed – and will continue to do so.  Investors must recognise that success in such dynamic markets requires more than patience. It requires strategy, discipline, and professional guidance.

GTC stands ready to provide that guidance.  Whether you’re a private investor doing it yourself or a member of a company’s pension fund, our multimanager investment solutions are designed to steer you through the complex waters of an ever-changing investment environment.