{"id":3913,"date":"2024-06-18T11:33:31","date_gmt":"2024-06-18T10:33:31","guid":{"rendered":"https:\/\/www.graphene-investments.com\/?p=3913\/"},"modified":"2024-06-18T11:40:03","modified_gmt":"2024-06-18T10:40:03","slug":"washington-we-have-a-problem","status":"publish","type":"post","link":"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/","title":{"rendered":"Washington, we have a problem&#8230;"},"content":{"rendered":"<p><strong>Given the trends that had been lasting for years, it had to happen sooner or later: the S&amp;P 500 index now includes three companies with weights above (or very close to) 7%, and its top eight constituents together represent 35% of total. This is possibly the biggest threat on active management.<\/strong><\/p>\n<p>The evolution of the US market&#8217;s broad index as a result of market cap variations will soon pose a serious problem to portfolio managers. In UCITS funds, it is already impossible to reach a significant overweight on Apple, Microsoft or Nvidia without breaking the 5\/10\/40 rule.<\/p>\n<p>However, there is something going on, that we see as an even more serious issue: with some of these megacaps living their own life in a way relatively disconnected from their fundamentals, as their deep cash pockets or their notoriety can offset many adverse developments, even active managers can&#8217;t afford ignoring them completely. Even if you find it unattractive, not holding a 7% constituent of your benchmark at all is a big risk, but mitigating that risk means allocating 4 or 5% of the assets to that undesired position. And if you happen to be positive on the stock, just reaching the point where the overweight stance will start takes a huge toll on your assets, to the detriment of the portfolio&#8217;s active share. In other words, the distorted structure of the index reduces active managers&#8217; ability to do their job and maintain an active exposure as high as they would normally do. Ours actually declined from 82% a few years ago to about 74% now.<\/p>\n<p><strong>There doesn&#8217;t seem to be many options for S&amp;P Dow Jones Indices to resolve this issue, which already effected narrower indices with a few dominant companies, but remains unprecedented in the world&#8217;s largest economy. Regulators may unwittingly contribute, if they keep digging into the Magnificent Seven&#8217;s alleged anticompetitive practices, and eventually go as far as breaking some of them up. This however remains a remote perspective, and for the moment, active portfolio managers will keep operating under constraints.<\/strong><\/p>\n<p><em>HG \u2013 June 18, 2024<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Given the trends that had been lasting for years, it had to happen sooner or later: the S&amp;P 500 index now includes three companies with weights above (or very close to) 7%, and its top eight constituents together represent 35% of total. This is possibly the biggest threat on active management. The evolution of the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":2624,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[104],"tags":[],"class_list":["post-3913","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-facts_figures"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.8 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Washington, we have a problem... - Graphene Investments<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Washington, we have a problem... - Graphene Investments\" \/>\n<meta property=\"og:description\" content=\"Given the trends that had been lasting for years, it had to happen sooner or later: the S&amp;P 500 index now includes three companies with weights above (or very close to) 7%, and its top eight constituents together represent 35% of total. This is possibly the biggest threat on active management. The evolution of the [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/\" \/>\n<meta property=\"og:site_name\" content=\"Graphene Investments\" \/>\n<meta property=\"article:published_time\" content=\"2024-06-18T10:33:31+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-06-18T10:40:03+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.graphene-investments.com\/wp-content\/uploads\/Cockpit-blog.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1814\" \/>\n\t<meta property=\"og:image:height\" content=\"1020\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Graphene Investments\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/\"},\"author\":{\"name\":\"Graphene Investments\",\"@id\":\"https:\/\/www.graphene-investments.com\/en\/#\/schema\/person\/fe86f0e80ddc1966ed69939965f1ebf8\"},\"headline\":\"Washington, we have a problem&#8230;\",\"datePublished\":\"2024-06-18T10:33:31+00:00\",\"dateModified\":\"2024-06-18T10:40:03+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/\"},\"wordCount\":349,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.graphene-investments.com\/wp-content\/uploads\/Cockpit-blog.jpg\",\"articleSection\":[\"Facts and Figures\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/\",\"url\":\"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/\",\"name\":\"Washington, we have a problem... - Graphene Investments\",\"isPartOf\":{\"@id\":\"https:\/\/www.graphene-investments.com\/en\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/www.graphene-investments.com\/wp-content\/uploads\/Cockpit-blog.jpg\",\"datePublished\":\"2024-06-18T10:33:31+00:00\",\"dateModified\":\"2024-06-18T10:40:03+00:00\",\"author\":{\"@id\":\"https:\/\/www.graphene-investments.com\/en\/#\/schema\/person\/fe86f0e80ddc1966ed69939965f1ebf8\"},\"breadcrumb\":{\"@id\":\"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/#primaryimage\",\"url\":\"https:\/\/www.graphene-investments.com\/wp-content\/uploads\/Cockpit-blog.jpg\",\"contentUrl\":\"https:\/\/www.graphene-investments.com\/wp-content\/uploads\/Cockpit-blog.jpg\",\"width\":1814,\"height\":1020},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Accueil\",\"item\":\"https:\/\/www.graphene-investments.com\/en\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Washington, we have a problem&#8230;\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.graphene-investments.com\/en\/#website\",\"url\":\"https:\/\/www.graphene-investments.com\/en\/\",\"name\":\"Graphene Investments\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.graphene-investments.com\/en\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.graphene-investments.com\/en\/#\/schema\/person\/fe86f0e80ddc1966ed69939965f1ebf8\",\"name\":\"Graphene Investments\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/www.graphene-investments.com\/en\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/e58ce4cff0030f30cf9d72d229a634b0396d52cc3458fd9a8d597ce9ee49a789?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/e58ce4cff0030f30cf9d72d229a634b0396d52cc3458fd9a8d597ce9ee49a789?s=96&d=mm&r=g\",\"caption\":\"Graphene Investments\"},\"url\":\"https:\/\/www.graphene-investments.com\/en\/author\/graphene\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Washington, we have a problem... - Graphene Investments","robots":{"index":"noindex","follow":"follow"},"og_locale":"en_US","og_type":"article","og_title":"Washington, we have a problem... - Graphene Investments","og_description":"Given the trends that had been lasting for years, it had to happen sooner or later: the S&amp;P 500 index now includes three companies with weights above (or very close to) 7%, and its top eight constituents together represent 35% of total. This is possibly the biggest threat on active management. The evolution of the [&hellip;]","og_url":"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/","og_site_name":"Graphene Investments","article_published_time":"2024-06-18T10:33:31+00:00","article_modified_time":"2024-06-18T10:40:03+00:00","og_image":[{"width":1814,"height":1020,"url":"https:\/\/www.graphene-investments.com\/wp-content\/uploads\/Cockpit-blog.jpg","type":"image\/jpeg"}],"author":"Graphene Investments","twitter_card":"summary_large_image","schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/#article","isPartOf":{"@id":"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/"},"author":{"name":"Graphene Investments","@id":"https:\/\/www.graphene-investments.com\/en\/#\/schema\/person\/fe86f0e80ddc1966ed69939965f1ebf8"},"headline":"Washington, we have a problem&#8230;","datePublished":"2024-06-18T10:33:31+00:00","dateModified":"2024-06-18T10:40:03+00:00","mainEntityOfPage":{"@id":"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/"},"wordCount":349,"commentCount":0,"image":{"@id":"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/#primaryimage"},"thumbnailUrl":"https:\/\/www.graphene-investments.com\/wp-content\/uploads\/Cockpit-blog.jpg","articleSection":["Facts and Figures"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/#respond"]}]},{"@type":"WebPage","@id":"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/","url":"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/","name":"Washington, we have a problem... - Graphene Investments","isPartOf":{"@id":"https:\/\/www.graphene-investments.com\/en\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/#primaryimage"},"image":{"@id":"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/#primaryimage"},"thumbnailUrl":"https:\/\/www.graphene-investments.com\/wp-content\/uploads\/Cockpit-blog.jpg","datePublished":"2024-06-18T10:33:31+00:00","dateModified":"2024-06-18T10:40:03+00:00","author":{"@id":"https:\/\/www.graphene-investments.com\/en\/#\/schema\/person\/fe86f0e80ddc1966ed69939965f1ebf8"},"breadcrumb":{"@id":"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/#primaryimage","url":"https:\/\/www.graphene-investments.com\/wp-content\/uploads\/Cockpit-blog.jpg","contentUrl":"https:\/\/www.graphene-investments.com\/wp-content\/uploads\/Cockpit-blog.jpg","width":1814,"height":1020},{"@type":"BreadcrumbList","@id":"https:\/\/www.graphene-investments.com\/en\/washington-we-have-a-problem\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Accueil","item":"https:\/\/www.graphene-investments.com\/en\/"},{"@type":"ListItem","position":2,"name":"Washington, we have a problem&#8230;"}]},{"@type":"WebSite","@id":"https:\/\/www.graphene-investments.com\/en\/#website","url":"https:\/\/www.graphene-investments.com\/en\/","name":"Graphene Investments","description":"","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.graphene-investments.com\/en\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.graphene-investments.com\/en\/#\/schema\/person\/fe86f0e80ddc1966ed69939965f1ebf8","name":"Graphene Investments","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.graphene-investments.com\/en\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/e58ce4cff0030f30cf9d72d229a634b0396d52cc3458fd9a8d597ce9ee49a789?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/e58ce4cff0030f30cf9d72d229a634b0396d52cc3458fd9a8d597ce9ee49a789?s=96&d=mm&r=g","caption":"Graphene Investments"},"url":"https:\/\/www.graphene-investments.com\/en\/author\/graphene\/"}]}},"_links":{"self":[{"href":"https:\/\/www.graphene-investments.com\/en\/wp-json\/wp\/v2\/posts\/3913","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.graphene-investments.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.graphene-investments.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.graphene-investments.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.graphene-investments.com\/en\/wp-json\/wp\/v2\/comments?post=3913"}],"version-history":[{"count":1,"href":"https:\/\/www.graphene-investments.com\/en\/wp-json\/wp\/v2\/posts\/3913\/revisions"}],"predecessor-version":[{"id":3914,"href":"https:\/\/www.graphene-investments.com\/en\/wp-json\/wp\/v2\/posts\/3913\/revisions\/3914"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.graphene-investments.com\/en\/wp-json\/wp\/v2\/media\/2624"}],"wp:attachment":[{"href":"https:\/\/www.graphene-investments.com\/en\/wp-json\/wp\/v2\/media?parent=3913"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.graphene-investments.com\/en\/wp-json\/wp\/v2\/categories?post=3913"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.graphene-investments.com\/en\/wp-json\/wp\/v2\/tags?post=3913"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}