Concentration Concerns

Readers of this morning’s Wall Street Journal learned (on the front page, no less) that many of the largest investors in the U.S. equity market hold similar portfolios.  “The overlap in the top 50 stockholdings between mutual funds and hedge funds…now stands at near-record levels, a study by Bank of America Merrill Lynch found.

It’s impossible for every investor to overweight a stock. If mutual funds and hedge funds are overweight in aggregate, some other investors must be underweight. (Possible underweights might come from pension funds, endowments, DC schemes, individual investors, etc.)

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