Morningstar - Q3 2024 - 42
Strategies
HOW-TO
It's Getting Harder for Large-Cap Funds
to Stand Out
How increasing index concentration
has reduced active share for some largecap
funds.
Tony Thorn
A few mega-cap stocks, often referred to
as the Magnificent Seven (Alphabet GOOG/GOOGL,
Amazon.com AMZN, Apple AAPL, Meta
Platforms META, Microsoft MSFT, Nvidia NVDA,
and Tesla TSLA), dominated large-cap funds'
2023 performance. That increased the
concentration of many large-cap indexes. The
10 largest holdings in the Russell 1000
Growth Index, for example, accounted for more
than half its assets at the end of 2023, up
from 42% at the end of 2022.
To see how this concentration has changed
over time, I added the Russell 1000 Growth,
Russell 1000, and Russell 1000 Value indexes to an
Investment List in Workspace in Morningstar
Direct and then added the data point for % Assets
in Top 10 Holdings going back to the indexes'
inception in 1978.
1
I exported the output to Excel and created a
quick graph.
The percentage of assets in the top 10 holdings
for the Russell 1000 Growth and the Russell
1000 peaked in March 2024 at 52% and 30%,
respectively. In the past 10 years, the concentration
in these two indexes has increased rapidly,
while the Russell 1000 Value's concentration has
slowly decreased after peaking in 2008.
How has this affected typical active largecap
funds? Are they more or less distinctive
than 10 years ago?
Morningstar Direct's Performance Reporting
module can help answer these questions
by looking at how the typical large-cap fund's
1
2
42
Morningstar Q3 2024
https://www.morningstar.com/stocks/xnas/goog/quote
https://www.morningstar.com/stocks/xnas/googl/quote
https://www.morningstar.com/stocks/xnas/amzn/quote
https://www.morningstar.com/stocks/xnas/aapl/quote
https://www.morningstar.com/stocks/xnas/meta/quote
https://www.morningstar.com/stocks/xnas/nvda/quote
https://www.morningstar.com/stocks/xnas/meta/quote
https://www.morningstar.com/stocks/xnas/msft/quote
https://www.morningstar.com/stocks/xnas/tsla/quote
Morningstar - Q3 2024
Table of Contents for the Digital Edition of Morningstar - Q3 2024
Morningstar - Q3 2024 - Cover1
Morningstar - Q3 2024 - Cover2
Morningstar - Q3 2024 - 1
Morningstar - Q3 2024 - 2
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Morningstar - Q3 2024 - Cover3
Morningstar - Q3 2024 - Cover4
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