Brutal year for stock picking spurs trillion-dollar fund exodus

The last thing a diversified fund manager wants is to run a portfolio dominated by just seven technology companies — all American, all megacap, clustered in the same corner of the economy. Yet as the S&P 500 pushed to fresh records this week, investors were again forced to confront a painful reality: Keeping pace with the market has largely meant owning little else.

A small, tightly linked group of tech super stocks accounted for an outsize share of returns in 2025, extending a pattern in place for the better part of a decade. What stood out wasn’t simply that the winners remained largely the same, but the degree to which the gap started to seriously strain investor patience.

Frustration dictated how money moved. Around $1 trillion was pulled from active equity mutual funds over the year, according to estimates from Bloomberg Intelligence using ICI data, marking an 11th year of net outflows and, by some measures, the steepest of the cycle. By contrast, passive equity exchange-traded funds got more than $600 billion.

The exits happened gradually as the year progressed, with investors reassessing whether to pay for portfolios that looked meaningfully different from the index, only to be forced to live with the consequences when that difference didn’t pay off.

“The concentration makes it harder for active managers to do well,” said Dave Mazza, chief executive officer of Roundhill Investments. “If you do not benchmark weight the Magn...