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Performance drag

As we approach the final weeks of the year, it has proven to be a very difficult one for active managers. The concentration of equity indices on a few stocks, has been a headwind for those portfolio managers trying to beat the index while maintaining a diversified portfolio. As you can see in the chart below, being underweighted on the #magnificent7, has cost the managers 213 bps on average on 2023. Being underweighted in the rest of the stocks has been a positive contributor to their relative performance. This phenomenon is usually corrected when the market turns, as it happened on 2022, which is where good active managers outperform. At this point, most managers are either max out on those stocks or are reducing their exposure to them, preparing for the reversal to the mean.


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Source: Goldman Sachs



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