Orbis believes investors are unaware of how concentrated their portfolios are when investing in global stocks and advisers would be wise to expand their horizons.
With the Magnificent Seven stocks making up a substantial component of the global market, investors can find what is being billed as a ‘diversified’ portfolio is actually concentrated in a small number of companies.
The 10 largest companies in the world currently are 90 per cent US firms -led by Apple and Nvidia – with only Taiwan Semiconductor (TSMC) sitting outside of the country.
Speaking to Money Management, Eric Marais, investment specialist at Orbis Investments, said: “Two-thirds of the MSCI ACWI index, which is meant to be most diversified index, is allocated to the US so the markets are very concentrated. This US market is looking quite expensive and quite stretched and the US dollar looks expensive too.
“You are in this window of time where it is more important than ever to have a diversified portfolio but it’s getting harder than ever to achieve that.
“Now is the time to be well balanced and the ACWI doesn’t provide that.”
While investors may assume that index funds are concentrated but that choosing an active manager can help them, Marais said this is not always the case.
“You would hope active funds would step up and provide some diversification compared to their passive counterparts but when you look at the largest active funds that are in use by financial advisers in Australia, they tend to have a strong US bias as well.
“That’s a shame, understandably people are inclined to invest in something performing well, so that’s where we hope Orbis can play a role in bringing them diversification.
“Our investment philosophy is contrarian so we tend to pay attention to the parts of the market that others aren’t focused on.”
One way this is being demonstrated in the firm’s $5 billion Orbis Global Equity Fund is by the low exposure to the US relative to the major indices. The fund currently holds 42 per cent to US equities versus 63 per cent by its MSCI ACWI benchmark and only one Mag 7 stock – Alphabet – features in the top 10 holdings.
Instead, Orbis is actively searching for non-US equities such as Korea’s Samsung Electronics and SK Square as well as Taiwan Semiconductor Company (TSMC). The fund has a 23 per cent allocation to emerging markets, including Korea, against a benchmark of 11 per cent and 13 per cent allocated to the UK rather than 3 per cent by the benchmark.
“US shares now trade at valuations well above their international peers, leaving little margin for disappointment. Beyond the US, we see many markets filled with strong, cash generative businesses that have simply fallen out of favour. These companies are not broken, they are simply overlooked,” he said.
The Orbis Global Equity Fund has returned 23.5 per cent (net of fees) over one year to 2 April 2026 versus returns of 10 per cent by the MSCI ACWI index benchmark.