Catenaa, Saturday, December 27, 2025- A small, tightly linked group of tech super stocks accounted for an outsized share of returns in 2025, extending a pattern in place for the better part of a decade.
The Bloomberg report said 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.
Contrary to pundits who thought they saw an environment where stock picking could shine, it was a year in which the cost of deviating from the benchmark remained stubbornly high.
On many days in the first half of the year, fewer than one in five stocks rose alongside the broader market, according to data compiled by BNY Investments.
Narrow participation isn’t unusual in itself, but its persistence matters. When gains are repeatedly driven by a tiny few, spreading bets more widely stops helping and starts hurting relative performance.
The same dynamic was visible at the index level. Throughout the year, the S&P 500 outperformed its equal-weighted version, which assigns the same importance to a smallish retailer as it does to Apple.
In the US, 73% of equity mutual funds have trailed their benchmarks this year, according to BI’s Athanasios Psarofagis, the fourth most in data going back to 2007.
The underperformance worsened after the recovery from April’s tariff scare as enthusiasm over artificial intelligence cemented leadership for the tech cohort.
