Several industries grew disproportionately heavy in their allocations to a handful of big companies in the past three years, creating a conundrum for active stock fund managers. They could follow the market and increase their weightings in those holdings—and the possibility of getting caught in a downdraft if those dominant stocks ever corrected—or trim or avoid the big holdings to manage risk, forgoing some gains if the market’s biggest denizens keep getting bigger.
The Magnificent Seven stocks come to mind. As Alphabet GOOGL, Amazon.com AMZN, Apple AAPL, Meta Platforms META, Microsoft MSFT, Nvidia NVDA, and Tesla TSLA ballooned in size, these technology companies dominated their industries and, in turn, many funds allocated to the sector.
Active managers can lean into big winners or industry darlings, with these positions quickly outgrowing other holdings in a portfolio and overexposing the fund to a less diverse set of companies. Knowing how your manager has navigated the risks of going along for the ride or sitting it out is essential to setting appropriate performance expectations.
As funds, in general, have been growing more concentrated in terms of their top 10 allocations, it’s worth considering whether your active funds have become similarly more concentrated in their holdings. An easy way to check for such concentration in a fund is to look at the percentage of a portfolio’s net assets allocated to the top 10 holdings in the portfolio.
3 Funds With High Exposure to Top Holdings
Here are three funds that have become increasingly concentrated by this measure over the past three years and warrant caution.
Alger Capital Appreciation
Alger Capital Appreciation ACAAX is a large-growth fund that held 62% of net assets in its top 10 holdings as of May 2025, up from 48% in May 2022. The fund tends to focus on market trends, and its allocation to the top holdings is near the record for the fund’s history, set at 65% at the end of 2024.
The fund has demonstrated a willingness to let winners in the portfolio run their course and grow relative to other holdings. Notable positions include Nvidia, which increased to 12.4% of assets from 1.4% three years prior, and Meta, which was up to a 7.5% allocation from 1.4% a month after its initial purchase in February 2023. Similarly, Microsoft sat at 13.4% of assets as of May 2025, among the peer group’s largest exposures to the company.
BlackRock Technology Opportunities
BlackRock Technology Opportunities BGSAX, though focused on an individual sector, attempts to avoid concentration risk by constructing an investment universe that’s driven by the careful guidance of the portfolio managers. However, the fund has not proved immune to the growth of overperformers. It had 56% of its net assets in its top 10 holdings as of July 2025, a bump from around 40% three years prior.
The fund usually holds 80-110 names, and the team has historically allocated more than 30% of net assets to the top 10. The portfolio moved far ahead of that historical norm as the Magnificent Seven mega-caps grew disproportionately relative to their industry peers. Within the portfolio, Nvidia went to 15% of assets from 2% three years ago, more than the category average of 13%; Broadcom AVGO grew to 7.3% from just under a percentage point, while the typical peer held 6.3%; and Meta was at 5.0% of net assets, above the 3.3% category average and the 0.6% at initial purchase in December 2022. Despite careful active management, the portfolio has had a hard time avoiding concentration risk.
Akre Focus
Finally, Akre Focus AKREX shows a pattern of increasing concentration with financial-services companies. The portfolio held 82% of its assets in the top 10 holdings as of June 2025, up from 75% three years prior. The fund tends to court concentration risk because of its smaller holdings count, which shrank to 15 positions from 30 over the past decade. Major positions in the tech and financials sectors ballooned over the three years ended June 2025; Constellation Software CNSWF grew to 13.0% from 7.3%, and KKR KKR was at 8.4%, up from 5.5%. Although the tech exposure here was underweight its large-growth peer group, the financial-services sector took up 46.0% of the portfolio’s assets, versus the 8.75% of the typical peer.
This article first appeared in the July 2025 issue of Morningstar FundInvestor. Download a complimentary copy of FundInvestor by visiting this website.