You can’t expect to outperform the crowd if you are doing the same thing as everyone else. Stocks tend to have their biggest weighting in the benchmark when they are most expensive, effectively causing investors in a benchmark-driven approach to buy high and sell low. We seek to do the opposite. Driven by "bottom-up" stock selection decisions, our allocations to countries, regions and sectors can often deviate substantially from their benchmarks. As a result, the Orbis equity strategies typically have high tracking errors and high active shares. Our portfolio construction process ensures that there are no unintended exposures as a result of our bottom-up decisions, but apart from that we are comfortable holding very different portfolios. The graph below shows just how extreme our positioning can be at times. For example, the Orbis Global Strategy had a 40 percentage point overweighting in Japan in November 1998, yet was underweight Japan by a similar magnitude when the strategy launched in 1990.
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