Matthew Patterson, Allan Gray business analyst

Investors who have heard about the harmonisation of the FTSE/JSE All Share Index (ALSI), with its final phase completed at the end of December 2025, may be wondering what the changes mean.

“The ALSI’s evolution reflects the shifts in the economy, in regulation and in global capital flows. While the harmonisation represents a shift, it does not ultimately change how an investment manager invests,” says Matthew Patterson, business analyst at Allan Gray.

The ALSI’s harmonisation is part of a project by the FTSE/JSE to unify its “vanilla” indices (including the ALSI) and Shareholder Weighted Indices (SWIX) under a single methodology. This initiative, implemented in two phases, first applied the SWIX free-float approach to vanilla indices in March 2024 and culminated with the decommissioning of SWIX indices at the end of 2025.

“Historically, the ALSI and SWIX indices used different methodologies for calculating the index weights of certain companies, specifically those with dual-listings or offshore primary listings, known as grandfathered shares. The ALSI used the full global free float of these companies, while the SWIX only used the portion of shares available on the local JSE register,” he explains.

Patterson adds that, over time, the differences between the two indices have naturally converged, due to corporate actions, such as restructurings, including brewer SABMiller’s acquisition by AB InBev and miner Billiton merging with BHP. “The harmonisation project formally eliminated the remaining discrepancies between the vanilla and SWIX indices, streamlining the South African equity market's benchmarking system and providing a clearer, more consistent framework for investors,” he says.

Reducing the weighting of global giants

As South Africa’s economy has diversified, so has its market. Investors who assume the ALSI is still dominated by large rand-hedged firms may be surprised to find that it is now driven by local banks, precious metal miners and media tech giant Naspers/Prosus.

“Harmonisation has sharply reduced the weight of global giants like Anglo American and Mondi, upweighting other constituents, especially financials,” Patterson comments. “It has also reduced the ALSI’s indirect offshore exposure by treating grandfathered shares the same as all other local shares.”

He says that the ALSI’s evolution is not just about individual companies; it also reflects dramatic sector shifts.

“Resources fell from 85% of the index in 1960 to under 10% by 2015, replaced by industrials, banks and consumer stocks.” More recently, this trend has partially reversed, with resources rebounding to around 30% of the index today, driven largely by the gold and platinum bull market.

“The top 10 shares have always dominated the ALSI, but the market leaders and sector compositions have also shifted over time,” he says. “In 1990, the market leaders were resource companies with a few industrial heavyweights. Today, the 10 largest companies by market capitalisation still account for about half of the market, but with greater sector diversification and much fewer crossholdings.”

Comfortable being different

Crucially, a changing index does not change how Allan Gray invests.

“As bottom-up investors, we build our portfolios company by company, focused on long-term value creation, while being mindful of risk,” he says. “For us, risk means the permanent loss of client capital.”

Patterson believes the ALSI is best used as a mirror, not a map. “We manage risk by limiting how much we hold in each share, ensuring exposure reflects our assessment of its underlying risk, regardless of its index weight,” he comments.

Some of the Allan Gray Equity Fund’s top holdings don’t even feature in the list of top ten ALSI shares, such as Glencore, Nedbank, Remgro and Woolworths.

“This is proof that we’re comfortable looking different from the ALSI. Even so, the index remains a useful reference for understanding the market’s shifting shape and for comparing your own performance to the broader market,” Patterson concludes.