Chicago, Illinois – Passive funds in the market are facing increased risks due to the growing concentration of indices. This concentration leaves them vulnerable to the success of a limited group of companies in the market.

William Blair’s Large Cap Growth strategy, however, takes a disciplined approach to risk management. The strategy focuses on constructing a portfolio that mitigates unintended risks in a changing market environment. Instead of making large factor or macro bets, the portfolio focuses on leveraging idiosyncratic risks at the stock level to drive performance.

Large-cap indices have seen significant concentration in recent years, with a few dominant companies contributing significantly to index performance. For example, in 2023, just seven stocks represented a large portion of the Russell 1000 Growth Index weight and contributed a substantial amount to the overall index return. This has made passive funds increasingly reliant on the success of these few companies.

Passive funds face challenges in addressing the risks associated with their exposure to these prominent index constituents as market concentration grows. This top-heavy exposure could expose them to significant risks if the performance of these companies falters.

In contrast, active managers have the flexibility to navigate the market landscape more effectively. By strategically positioning their portfolios, active managers can capitalize on opportunities while avoiding the risks associated with dominant weights in the index.

William Blair’s Large Cap Growth strategy focuses on investing in “structurally advantaged” companies that have the potential to outperform the market. The strategy’s portfolio construction framework aims to mitigate risks and produce consistent risk-adjusted returns over time.

The investment approach at William Blair identifies growing companies within growing industries using a research-intensive process. By focusing on companies with strong long-term growth potential and durable earnings growth, the strategy aims to outperform the market consistently.

Rather than being bound by index weights, active managers can identify opportunities across sectors and market cap segments. This flexibility allows them to create portfolios with a more intentional focus on quality growth companies that can drive long-term alpha.

William Blair’s Large Cap Growth strategy aims to provide consistent long-term performance by investing in structurally advantaged companies and prioritizing stock selection to manage risks effectively. The strategy offers potential for strong risk-adjusted returns and less volatility compared to the broader large-cap growth universe.