In brief
- Passive equity investing is an active decision that increases concentration risk, positions clients in the winners of yesterday and is anticipated to achieve half the return of the last decade.
- Despite the dominance of passive strategies in U.S. equity categories, leading active managers continue to deliver meaningful long-term outperformance for clients, underscoring the importance of thoughtful manager selection today.
- J.P. Morgan Asset Management’s global research, collaboration and technology drive consistent long-term outperformance, with 89% of equities AUM outperforming their benchmarks over the past decade.1
It is an active decision to go passive
A passive US Equity allocation may introduce less obvious, but meaningful, risk into portfolios.
- Heightened index concentration risk: As of March 2026, the top 10 companies by market cap represent nearly 40% of the S&P 500 Index (see Exhibit 1). Concentration is even more extreme in the Russell 1000 Growth Index, where the top 10 companies represent 61% of the index.2 These companies have generated strong earnings growth in recent years, but we anticipate a broadening of index returns moving forward. The right active manager can provide balanced exposure to the underappreciated winners of tomorrow by overweighting select smaller index companies.
- Missing out on leadership evolution: Decade to decade, there is rarely overlap among the top 10 names (see Exhibit 2). Active managers can use this to their advantage by taking a differentiated approach to the top index companies, while a pure passive approach is an active bet that the winners of last decade will be the winners of the next decade.
- The need for alpha: Over the next decade, our Long-Term Capital Markets Assumption (LTCMA) for large cap U.S. stocks is 6.7% (see Exhibit 3). This is less than half what the category has annualized over the last decade. Moving forward, clients will be more reliant on alpha, not just beta, for their total return. Experienced active managers focus on fundamentals—long-term earnings and growth—to drive stock selection and continually monitor risk.
The hurdle to outperform is high, but leading active managers do outperform
Since 2008, top quintile active managers across large cap value, growth and blend Morningstar categories have generated long-term outperformance for investors, but beating the index consistently has become harder for the average active manager.
Because the hurdle to outperform is high and results vary meaningfully by year, broad “active vs. passive” conclusions can miss what matters most: selecting the right active approach for the right objective and holding period. Over the past 30 calendar years, the annual share of active large-cap managers outperforming their benchmark averaged 41%,3 reinforcing why manager selection and process matter for long-term outcomes.
As alpha compressed, investors shifted toward passive, which now represents 65% of the $18.5 trillion U.S. Equity Morningstar category.4
While it has become more difficult to outperform and investors have moved toward passive options, a leading active manager can still provide an attractive long-term value proposition and mitigate risks associated with passive. Historically, long-term equity returns are driven by earnings and dividends, while short-term returns are driven by P/E multiple expansion as a result of market sentiment, company news or emerging themes (see Exhibit 4). An experienced active manager focuses on fundamentals—long-term earnings and the forward looking multiple for those earnings—to drive stock selection and continually monitor risk. Today, it is imperative to be deliberate about which active manager you choose, as it can have a significant impact on achieving long-term financial goals.
Our active advantage
At J.P. Morgan Asset Management, 89% of our equity assets under management have outperformed their benchmarks over the last 10 years.1 Our global platform exemplifies and integrates the characteristics of a leading active manager, enabling our investors to uncover winning stock opportunities and deliver alpha to our clients over the long term.
- Global scale with a local edge: $1.3 trillion in client assets under management with a $190 million annual research budget to invest, execute and deliver.5 132 dedicated career research analysts covering over 2,500 companies across four continents, with direct access to company management through 5,000 annual meetings.6
- Culture of collaboration: Collaborative global conversations are created through the partnership model between research analysts and portfolio managers. We treat the research analyst role as a career position, not a stepping stone; thus, our analysts manage risk and are compensated based on their own sector-specific portfolios. Global sector teams also meet monthly to maintain connectivity across the globe. This structure cultivates more honest and curious conversations that drive our leading insights.
- Technology that accelerates outcomes: Spectrum (our investment platform) connects research, portfolio management and trading in one platform. We can see more and act faster, especially in volatile markets.
Altogether, our time-tested research approach has generated long-term outperformance for our clients. Since 1997, our top-ranked companies outperform our bottom-ranked companies (see Exhibit 5). This alpha signal serves as the ingredient for our actively managed equity offerings, a strong starting point to generate outperformance over the long term for our clients.