Megacaps Overwhelming Equity Factor Signals?

Has concentration of world equity market capitalization in a few technology megacaps disrupted factor investing? In his short February 2025 paper entitled “Implications of Increased Index Concentration for Active Investors”, David Blitz examines implications of the rise of megacap technology stocks for factor portfolio management. He first considers strategies that focus on capturing a single premium from among quality, momentum or low-volatility factors without tracking error control relative to a world index. He then looks at multi-factor strategies with tracking control. Using megacap/world market capitalizations and MSCI World Quality, Momentum, Minimum Volatility and overall market index returns during 2018 through 2024, he finds that: (more…)