Index concentration has quietly become an allocation decision
Passive exposure is no longer diversified in the sense most trustees assume.
Markets DeskPublished 3 days ago
A broad-market index whose top ten constituents represent an unprecedented share of capitalisation is a concentrated bet wearing the language of diversification.
Pension trustees are beginning to say so in writing. The responses range from capped-weight variants to explicit equal-weight sleeves, none of them costless.
The uncomfortable observation is that the concentration reflects genuine earnings concentration. This is not a pricing anomaly to be arbitraged away; it is an economy in which returns to scale have become extreme.
Drafted with AI assistance and reviewed by the Leaders & Impact editorial desk. Sourcing and factual assertion remain human-owned.