Apple, Microsoft, Facebook and Amazon collectively make up more than 10% of the S&P500. Multinational internet and media group Naspers, Africa’s largest company and the world’s seventh-largest internet company, made up a staggering 17.43% of the JSE all share index as at the end of September.
Fund managers who have not invested in the company yet have increasingly seen their alpha (outperformance) from other good stocks diminished because of Naspers’s overwhelming dominance.
Facebook was revolutionary when it started as a social media platform, changing daily interactions. Other technologies set to disrupt markets include Blockchain, a digital ledger that records just about any transaction. With endless uses from recording money transfers and payments to sales of goods and services, Blockchain could overhaul how record-keeping is managed and eliminate intermediaries such as traditional banks from the process.
Cryptocurrencies such as bitcoin, Monero, Ethereum, Litecoin and Ripple are digital currencies that are increasingly being traded like shares. The original cryptocurrency, bitcoin, was started in 2009. In March 2017, the value of one bitcoin surpassed the price of gold.
Digital currencies have some way to go before they become completely mainstream and their potential effect on finance systems fully understood, but change is happening fast. Since 2015, more than 100,000 merchants globally have accepted some form of digital currency.
Apart from investment opportunities, technology is changing how investment takes place by shifting the way information is used in investment decisions. Artificial intelligence (AI) and machine learning change how fund managers manage portfolios and analyse data and how they respond to investment opportunities.
Given the sheer volume of data available, AI provides enhanced tools and research methodologies in order to provide investment insights.
This includes real-time market insights, improved economic indicators and greater understanding of investor sentiment.