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Why large-cap funds are losing their alpha edge post-2010: Key factors behind decline and what investors should do
livemint.com 3 hrs ago·30 Jul 2026, 2:44 pm
Stocks livemint.com
Large-cap funds have historically served as a safe haven for investors, but their ability to generate returns that significantly outperform the broader market has been steadily declining since 2010. This trend is largely attributed to the growing dominance of passive investing, such as index funds, which now hold a massive share of the market. As these funds simply track benchmarks, they naturally absorb the performance of top companies, leaving active managers with fewer opportunities to find undervalued stocks.
For investors, this shift means that the traditional advantage of large-cap funds is fading. The market is becoming more efficient, making it harder for fund managers to consistently beat the benchmark. Consequently, investors should be more selective when choosing active funds, focusing on those with a proven track record of adding value through stock selection rather than relying on the sector's historical performance.
Moving forward, investors should evaluate fund managers based on their ability to navigate a more competitive landscape. It is also prudent to consider a diversified portfolio that includes mid and small-cap funds, which may offer different risk-return profiles. Ultimately, understanding the changing dynamics of the market is key to making informed investment decisions.
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