Active Equity Funds Bleed $1 Trillion as Tech Concentration Rewrites Market Rules
The S&P 500's record run masked a brutal divergence: seven tech giants carried the index while active managers bled assets. Investors pulled $1 trillion from equity funds in 2023—the 11th straight year of outflows and the deepest of the cycle—as concentrated bets trumped diversified portfolios.
Passive ETFs absorbed over $600 billion of the fleeing capital. 'The concentration makes it harder for active managers to do well,' said Roundhill Investments CEO Dave Mazza. 'If you don’t benchmark-weight the Magnificent Seven, you’re taking underperformance risk.'
The exodus wasn’t sudden but surgical. Fund managers charging premium fees for stock-picking prowess watched clients leave when their deviations from the tech-heavy index failed to deliver. Market veterans now question whether traditional diversification strategies can survive in an era where megacap tech dominates returns.
