Reflections on a conversation with Dan Brocklebank

Offshore investing has long been a cornerstone of South African financial planning. With a small, concentrated local market and persistent currency risk, advisers have rightly encouraged clients to look beyond our borders to diversify portfolios and access global growth.

Yet, as a recent conversation with Dan Brocklebank, UK director at Orbis Investments and offshore partner to Allan Gray, made clear, offshore diversification is no longer as straightforward as it once was.

The global opportunity set remains compelling. But the structure of global markets, and particularly the dominance of the United States – demands more scrutiny, more nuance, and more active decision-making from advisers than ever before.

The dominance no one can ignore - The most obvious global trend, and one that Brocklebank emphasised early in the discussion, is the continued dominance of the US equity market. This is not news. What is unusual, however, is the extent of that dominance.

Roughly three-quarters of the MSCI World Index is now represented by US companies. Within that, a very small group of stocks, largely large-cap technology names, is responsible for a disproportionate share of market returns. This level of concentration is historically unprecedented.

Crucially, Brocklebank was careful not to frame this as a prediction of imminent collapse. The US remains a genuine global hub of innovation, particularly in technology and artificial intelligence. The companies leading this charge are highly profitable, well capitalised, and operating at scale.

The risk, he argued, is not innovation itself. The risk lies in investor behaviour.

When excitement becomes extrapolation - Most investment bubbles, Brocklebank noted, begin with something real. Railways, electricity, the internet, all were transformative technologies that justified excitement and capital inflows. The problem arises when investors begin to assume that recent dominance will persist indefinitely.

In today’s market, expectations are high. Valuations reflect extraordinary optimism. And when markets are priced for perfection, they don’t need bad news to correct. They simply need conditions to stop improving at the pace investors have come to expect.

This is where advisers need to tread carefully. Many clients believe they are “diversified” because they hold a global equity fund or a world index tracker. In reality, they may be taking a highly concentrated bet on one country, one currency, and a handful of companies, without fully realising it.

Passive is no longer neutral - Historically, adding a global index fund to a South African portfolio provided meaningful diversification. Today, Brocklebank argued, the global index is no longer a neutral reference point.

Following the index is now an active decision: a bet on US exceptionalism continuing on the dollar remaining dominant, and on a narrow group of technology stocks sustaining leadership. That may well continue for some time. But it is a risk that should be acknowledged and consciously managed.

For advisers, this changes the conversation. Achieving diversification now requires looking beneath the surface of portfolios and understanding what clients actually own, not just the label on the fund.

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