Recent local-market maps show a striking divide: gold and platinum shares occupy one distinct part of the map, while much of the remaining market sits in another.
That apparent simplicity conceals meaningful differences within “everything else” — differences that become clearer once the precious-metal shares are removed.
The market view
Gold, platinum, and everything else
A pattern has stood out strongly in recent months on local maps. The local market has increasingly come to be dominated by a gold-and-platinum-versus-everything-else split. On the map, this can make it appear as though South African investing at the moment is almost a simple decision: how much to allocate to gold and platinum, and how much to allocate to everything else.
That got us thinking about what is going on within the “everything else” category.
Digging deeper
Looking beneath the surface
The interesting thing is that, while in a 2D map these shares may at first appear to be much the same, there is in fact a great deal of diversity beneath the surface. As the map below shows, once gold and platinum shares are removed, the rest of the market spreads out meaningfully. A clear left–right split emerges between SA Inc shares and offshore earners, while a top–bottom split appears between defensives and cyclicals.
The implication
What might this mean for fund managers?
One possible implication is that it may be useful to take a closer look at your portfolio's position excluding gold and platinum shares. In particular, it may be worth asking how concentrated your risk really is within “everything else”, and whether seemingly similar positions may in fact be expressing quite different underlying exposures.
For example, the hypothetical portfolio below appears to have balanced active bets between the upper-left (gold & platinum) and lower-right (everything else) quadrants. However, when gold and platinum are removed, the tilts are concentrated in the lower-right (SA Inc Defensive) quadrant.
Quick how-to
Excluding gold and platinum in the Positioner Wizard
To exclude gold and platinum from your Positioner Wizard, go to the Securities tab, edit Sectors to include, and select all sectors apart from Gold Mining and Platinum and Precious Metals.
Closing thoughts
Looking beyond the headline gold-and-platinum split reveals a more varied opportunity set. For fund managers, viewing a portfolio both with and without precious-metal shares can make underlying concentrations, offshore exposure, defensiveness and cyclicality much easier to see.
We would be glad to hear any thoughts or questions about the analysis.