Reducing Tracking Error
July 5, 2025 by Ted Seides
One of the many insights from last week’s Capital Allocators Senior Decision Makers Summit is a shift in thinking about public market active management. For many years, institutions favored managers with concentrated, research-driven portfolios alongside core beta-plus managers. After a decade and a half of outperformance of the Mag 7, several investors are adding completion strategies.
Scott Bessent once told me: “Markets cause the most pain, to most participants, most of the time.” Does this shift in strategy mark the peak of a cycle where allocators can no longer take the pain of underperformance? Or is it a smart adjustment to correct a structural underweight of a group of stocks that will continue to thrive?
The truth often lies somewhere in the middle. Whatever the cause and outcome, it’s a notable change in how allocators are tackling the Mag 7 phenomenon.
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