Portfolio managers of South African small- and mid-cap funds are expecting further gains this year after stellar returns in 2021. This is on the back of the recovery in company earnings and the reopening of several local sectors.

Local fund managers see opportunities in a number of sectors, including resources, construction, discretionary retail, financials, hospitality, leisure and food.

Adding to the bullish mood, these managers believe South African companies are in very good shape. They also think small caps offer more value than large-cap JSE stocks.

A spate of buyouts of JSE-listed companies also encourages the view that there is a lot of value in this part of the market.

However, the managers warn that 2022 will be trickier, as 2021 was a recovery year when investors made some easy money. They are also concerned that the boost provided by grant income, people accessing their retirement pots and retrenchment payouts last year will fade.