Eric Marais

The analogy between the current state of global equity markets and the cycle of Venus, characterised by extremely slow rotation between the sunrise and the sunset, indicates that after the very long cycle markets are getting closer to the peak and things might change.

This is the crux of the ‘Sunrise on Venus’ whitepaper published by investment manager Orbis, a sister company to Allan Gray, which notes that while the days on Venus are long, the same goes for the investment world, where growth and passive strategies have “enjoyed a long day in the sun” and investors positioned themselves as the sun would “never set”.

The last decade was defined as a “fabulous time” for the owners of financial assets, to say the least, helped by globalisation, higher corporate profits, reduced inflation and relatively low interest rates.

However, all of the above produced a large group of investors who have become too complacent instead of preparing their portfolios for ‘sunrise’, or in other words, properly diversifying across exposures and across styles within equities.

Orbis investment specialist Eric Marais, says he was surprised by lack of preparedness by investors.

He notes that the data in the whitepaper found that Australian advisers are overweight to growth investments whether its in pass or active globally equity funds.

“It is really surprising to us that investors have not repositioned more aggressively for what looks like a changing environment,” he says.

Asked where he sees the most elevated risks, Marais pointed to the fact that global indices have a disproportionally high representation of the US growth stocks, and in particular mega cap technology, shares.

“If you look at the MSCI world index, which is meant to be a globally well diversified broad index, about 70 per cent of that index is made up of the US shares,” he says.