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B. G., Opalesque Geneva: For several years, investors have pointed out how concentrated the Russell benchmarks have become, according to Kevin Shea, CEO of Disciplined Alpha, a systematic investment manager in Boston. Those concentrations have made it difficult for portfolio managers to create portfolios with reasonable tracking error to their benchmarks while staying within regulatory constraints. (Tracking error is the standard deviation of the difference between the returns of an investment and its benchmark.) One such constraint is that positions in a portfolio that exceed 4.5% weight, when summed up, must not exceed 50% of the portfolio.
As of October 31st, the Magnificent 7 stocks (Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla) represented 54.41% of the weight of the broad Russell 1000 Growth Index, Shea notes in his latest monthly report seen by Opalesque.
Adding up those stocks that are more than a 4.5% weight in the index, yields 51.88% of the weight of the index (excluding Tesla, but including both share classes of Alphabet). A Russell 1000 Growth ind...................... To view our full article Click here
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