Why your fund manager can’t beat today’s stock market

In theory, active fund managers, who try to pick the best investments and avoid the worst, should excel when some stocks zig as others zag and when the gap between the winners and losers is wide. If stocks are moving up and down together much less than usual, and the winners and losers are even farther apart than normal, that should be ideal for stock pickers. At my request, Jeremy Raccio, a senior portfolio manager at UBS Asset Management, analyzed correlations within the S&P 500 back to early 2000—using realized returns, rather than the implied volatility that Cboe uses. Actively managed U.S. stock funds have an average of 14.2% in their top three holdings and 20.8% in their top five, according to Morningstar, well below the concentration of the S&P 500. Nvidia alone accounted for nearly one-third of the S&P 500’s total return in the first half, according to S&P Dow Jones Indices.