The AI-driven rally has rewarded a relatively small group of mega-cap stocks. For investors, that can mean a bumpier ride is ahead. When market leadership is this concentrated in a single theme, a traditional index allocation may not be providing the diversification investors expect.
The opportunity isn't necessarily to replace what's worked. It's to complement it. Don’t sleep on the opportunities that may create a smoother investment experience.
Diversification can come from:
- Investment type: Potential to generate income and pursue equity participation through a differentiated return stream.
- Style: Reduce reliance on a single market leadership trend through a disciplined value approach.
- Cap size: Expand exposure to businesses that look very different from today's concentrated index leaders.
The US stock market has experienced dramatically rising index concentration in recent years. What does this mean?
It means the top ten stocks in the S&P 500 now make up more than 35% of the index, and roughly one third of the S&P 500 is connected to the artificial intelligence trade in some way.
While this has been a great thing, while index concentration has been rising, it leaves investors in US large cap equities much less diversified than before.
And if anything goes wrong with the AI mega cap trade like it did in July, volatility could be significant.
What's the solution for this? Perhaps it's time to think about diversifying into an actively managed equity strategy that's less concentrated in the mega cap AI trade.
That could mean going down in market cap, focusing on value stocks or looking at income generating strategies.
They say diversification is the only free lunch on Wall Street. We believe that.
3 ways to rebuild diversification
These strategies represent distinct approaches that seek to reduce reliance on a concentrated market exposure.
Vaughan Nelson Mid Cap Fund
Ticker
VNVYX
High-conviction US mid-cap stock fund that seeks long-term capital appreciation by investing in stocks of companies with undervalued assets, earnings growth, or dividend yield.
Total net assets
$217.97 million
as of 10/20/2026
Morningstar category
Mid-Cap Blend
Oakmark Fund
Ticker
OANMX
Concentrated, actively managed large value US equity fund.
Total net assets
$23.35 billion
as of 09/30/2026
Morningstar category
Large Value
Natixis Gateway Quality Income ETF
Ticker
GQI
Income-oriented equity strategy that combines a diversified portfolio of high-quality US equity securities with an index-option selling overlay program that generates robust distributable cash flow to shareholders.
Total net assets
$310.46 million
as of 10/20/2026
Morningstar category
Derivative Income
Let us look under the hood
Our Portfolio Analysis and Consulting team can quickly identify your clients' mega-cap concentration risk and whether income, value, or mid-cap strategies could help insulate their portfolios.
Related insights
Why the case for value investing remains strong
Read why value investing still matters as growth valuations rise and index concentration increases.
Does the AI stock correction change the outlook?
Hear our macro experts explain what bank earnings, Fed policy, and bond opportunities could mean for investors.
2026 Natixis Strategist Outlook: Everything, everywhere, all at once.
H2 Outlook accounts for war, inflation, rates, elections . . . and, of course, AI.
This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions contained herein are subject to change based on market and other conditions and do not necessarily reflect the views of Natixis Investment Managers or any of its affiliates. There can be no assurance that developments will transpire as forecasted, and actual results may vary.
All investing involves risk, including the risk of loss of principal. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided. Investors should fully understand the risks associated with any investment prior to investing.
Diversification does not guarantee a profit or protect against a loss.
Before investing, consider the fund's investment objectives, risks, charges, and expenses. You may obtain a prospectus or a summary prospectus containing this and other information. Read it carefully.
NIM-08172026-0ou2ycnu
NTX001155
Want to learn more? Subscribe below.
Thank you!
Your form has been submitted.