Highlights

  • Diversification benefits offered by broad market index investing have long made it an enticing and popular option. However, the composition of one of the most broadly followed indices, the S&P 500, has meaningfully changed over recent years.
  • Seven of the eight largest weighted companies in the S&P 500, as of 3/31/2022, represented 27% of the index. Of note is the fact that these seven names are all primarily driven by the same factors – exposure to the mega-large cap technology momentum trade.
  • Factor analysis identifies performance catalysts for a given security. This allows an investor to accurately isolate contributors of return for each position, a key distinction when creating a truly diversified portfolio. For example, Vaughan Nelson’s Select strategy typically holds 30 names or less, but the portfolio has always maintained exposure to a broad number of factors.
  • Given the concentration and similarities amongst the largest S&P 500 names, the S&P 500’s factor diversification has declined while Vaughan Nelson’s Select strategy has remained relatively constant.
All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, and alternative investments. This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions expressed may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.

Diversification does not guarantee a profit or protect against a loss.

S&P 500® Index is a widely recognized measure of US stock market performance. It is an unmanaged index of 500 common stocks chosen for market size, liquidity, and industry group representation, among other factors. It also measures the performance of the large-cap segment of the US equities market.

This document may contain references to copyrights, indexes and trademarks that may not be registered in all jurisdictions. Third party registrations are the property of their respective owners and are not affiliated with Natixis Investment Managers or any of its related or affiliated companies (collectively “Natixis”). Such third party owners do not sponsor, endorse or participate in the provision of any Natixis services, funds or other financial products.

The index information contained herein is derived from third parties and is provided on an “as is” basis. The user of this information assumes the entire risk of use of this information. Each of the third party entities involved in compiling, computing or creating index information disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to such information.

4231250.2.1