Active management thrives in areas where passive fails to capture opportunities. In 2024, 66% of actively managed U.S. and global real estate funds outperformed their passive benchmarks, while only 30% of active small-cap U.S. equity funds underperformed, implying a 70% success rate in small-cap stocks. Even among large-growth funds, active managers posted a 40% one-year outperformance rate, doubling the prior year’s figure. Clearly, skilled stock-pickers can still deliver alpha when they leverage deep research and tactical agility.
With the S&P 500 increasingly dominated by mega-caps, the limitations of market-cap indexing have grown. The top five companies now account for 29% of the S&P 500’s market capitalization, more than at any point in the past 60 years, and the top 10 names represent 40% of the index’s total weight. For high-net-worth investors:
- Concentrated risk: Relying solely on passive indices often means overweighting a handful of stocks regardless of valuation or outlook.
- Missed tactical shifts: Market-wide exposures can’t pivot away from underperforming sectors or capture emerging opportunities in smaller or niche areas.
- Customization gaps: Passive funds don’t account for individual tax circumstances, income requirements, or legacy-planning needs.
This environment sets the stage for active management to shine, delivering targeted exposure, downside protection, and portfolio customization that HNW individuals demand.
Bespoke stock-picking offers several advantages:
- Deep, focused research: Active managers concentrate on a curated universe, often 50–75 high-conviction names, using both quantitative screens and fundamental analysis to identify undervalued or overlooked companies.
- Tactical flexibility: When market leadership shifts, active portfolios can rotate sector weights and add or trim positions, capturing short-term rallies and avoiding sudden drawdowns.
- Advanced risk management: Through hedging strategies and drawdown controls, active managers can help cushion portfolios during volatility spikes, something a passive index simply can’t do.
- Customization for HNW goals: From tax-lot harvesting to estate-planning overlays and concentration limits, active strategies are tailored around your unique financial blueprint.
If you’re ready to move beyond one-size-fits-all indexing and pursue alpha with purpose, let’s connect:
- Book a complimentary 30-minute strategy session with our portfolio management team.
- Check out or quarterly commentary detailing marketing conditions and management strategies.
Don’t let your portfolio be driven by index weights alone. Discover how bespoke stock-picking strategies can align with your goals and capture growth where it matters most.
