Analysis: Apple's growing stock market heft poses dilemma for fund managers

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The massive rally in Apple's shares is forcing some fund managers to revisit a thorny dilemma: they may not own enough of the stock.

“If you’re an active manager, one of the issues is it’s hard to own that much of one name. You are taking on more and more risk," said Todd Sohn, technical strategist at Strategas.

The lower allocations to Apple and other stock market winners may be hurting their performance. Only 20% of actively managed mutual funds with broad U.S. market exposure have outperformed the S&P 500 year-to-date as of June 28, according to Robby Greengold, strategist at Morningstar. Greenwood Capital, which has $1.4 billion in assets under management, counts Apple as one of its top five holdings, said chief investment officer Walter Todd. But risk management rules at the South Carolina firm prohibit putting more than 5% into any one stock; that means the firm is underweight Apple compared to the S&P 500, to which Greenwood funds benchmark their performance.

The cost of limiting Apple shares may be particularly high for fund managers this year, given the stock's swelling weight in indexes.

 

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