Extreme concentration

Market concentration in the S&P 500 has reached extreme levels. Today, the top 10 companies account for around 35–40% of the index — close to record highs in modern history. While this is far below the “broad diversification” that many investors expect from an index fund, it means performance is increasingly driven by a handful of mega-caps.

For investors, this creates a paradox: ETFs tracking the S&P 500 offer simplicity, but they also embed significant company-specific risk. For active managers, the challenge is inverted — not owning these large names can translate into significant tracking error and career risk.

At ECP, we remain committed to our selective approach: identifying individual companies with undervalued earning power, and when using ETFs in discretionary portfolios, carefully monitoring the concentration risks hidden within.