Diving Into Concentrated Active Large Cap ETFs

One of the most valued attributes of ETFs is diversification. Rather than attempting to choose a couple of winning stocks, these equity funds own more securities. This should allow risk to be spread around. For many advisors and investors, ETFs tied to the S&P 500, or the Russell 1000, indices are how they gain U.S. equity exposure. However, others that want to try to outperform can still gain some diversification benefits using concentrated ETFs.

These best ideas portfolios tend to own less than 50 stocks, with some less than 25. Often, some favored stocks will represent more than 10% of the portfolio.

American Century’s Active ETF Having Success in 2024

For example, the American Century Focused Growth ETF (FDG) recently had 37 positions, with NVIDIA and Amazon.com representing 17% and 10% of assets, respectively. However, the fund’s top-10 holdings recently also included Chipotle, Intuitive Surgical, and Regeneron Pharmaceuticals. Management’s bottom-up investment process seeks to uncover companies with durable competitive advantages believed to offer opportunities for higher and sustained growth.

In 2024, the approach has been working. FDG rose 23% year-to-date through July 31, outpacing 18% gain for the iShares Russell 1000 Growth ETF (IWF).

Another concentrated active fund that has outperformed in 2024 is the Natixis Loomis Sayles Focused Growth ETF (LSGR). As of July 29, LSGR was up 20%, edging out IWF. LSGR uses a seven-step investment process. This includes seeking companies with sustainable competitive advantages and balance sheet strength.