Three investment trends every South African investor needs to understand in 2026

Three pivotal shifts are reshaping the investment landscape, and their implications reach well beyond institutional portfolios. At a recent Stonehage Fleming investment conference, leading investment professionals urged investors to rethink how they build and manage wealth in the years ahead.

What AI means for your portfolio

Artificial intelligence has become far more than a technology story for investors. AI is the most significant structural trend facing investors today, its transformative potential can be compared to earlier revolutions such as electrification.

The scale of adoption is already striking: according to McKinsey’s latest global survey, about 88% of organisations worldwide are using AI in at least one business function. The IMF estimates that AI could affect around 40% of jobs globally, rising to 60% in advanced economies where more cognitive tasks are involved.

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But we caution against simply piling into AI-focused shares. Picking the winners in any new technology wave is notoriously difficult. The more rewarding opportunity lies in companies across all sectors that are using AI to cut costs, protect margins, and strengthen their competitive positions over time, whether in financial services, manufacturing, healthcare, or retail.

AI matters not because it changes markets overnight, but because it changes how companies compete over decades. It’s about understanding how a structural shift gradually shows up in earnings, productivity, and long-term returns.

For South African investors, this means scrutinising not just technology companies, but any business that is meaningfully integrating AI into its operations.

Why passive investing is not always the cheapest or safest option

The rise of passive investing, tracking an index rather than paying a manager to select stocks, has been one of the defining financial trends of the past 15 years. And for good reason: in large, highly efficient markets like US equities, it has delivered strong returns at low cost.

But we have warned that passive is not always the best choice and can carry risks that are easy to overlook.

The most significant is concentration. Market-capitalisation-weighted indices automatically give more weight to the largest companies, regardless of their valuations or business fundamentals.

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The dominance of the so-called “Magnificent 7” technology stocks within the S&P 500 is a vivid illustration of this risk. To manage it, Stonehage Fleming has been allocating a portion of its passive exposure to equal-weighted indices, spreading risk more evenly across holdings.

We also warn against assuming the investment environment of the past decade will repeat. The era of low interest rates and stable inflation that made passive strategies so attractive may be behind us.

In a world of higher volatility, geopolitical shifts, and elevated inflation, active management, particularly in less efficient markets such as smaller companies, emerging markets, and niche sectors, can add genuine value.

The overarching message: portfolio construction should be designed for resilience, not anchored to recent returns.

Why private markets matter even if you’re not ultra-wealthy

Here’s a striking fact: in the US, 87% of companies with revenues exceeding $100 million are privately held, and only 13% are listed on public exchanges. Over the past three decades, the number of publicly listed US companies has nearly halved, while privately held companies have more than doubled.

What this means for investors is significant. If you invest only in publicly listed markets, you are accessing a shrinking slice of the broader economy.

This is one of the most important structural shifts in global investing. Globally, high-net-worth investors allocate more than 20% of their portfolios to private equity on average.

In South Africa, that figure is considerably lower, and we expect the gap to narrow as local investors increasingly recognise the opportunity they may be missing.

Private assets do require careful consideration: they are less liquid than listed investments and need to be sized appropriately within a portfolio. But for investors seeking exposure to the full breadth of economic activity, some allocation to private markets is becoming hard to ignore.

Three takeaways for investors

1. Don’t chase AI hype. Look for AI-enabled businesses. The companies most likely to deliver sustained returns are those embedding AI into their operations to drive productivity and protect margins, not necessarily those building the technology itself.
2. Passive is not risk-free. Index concentration, particularly in global indices dominated by a handful of mega-cap technology companies, is a real and underappreciated risk. Consider whether your passive exposure is as diversified as you think.
3. Private markets deserve a place in your portfolio. With the majority of large companies now privately held, investors who ignore this asset class risk missing a growing share of economic value creation.

Lehani Marais, Bryn Hatty, and Reyneke van Wyk, are from Stonehage Fleming Investment Management South Africa.