1) Fascinating that the 5/25 rule is becoming an issue for growth oriented mutual funds.
MSFT, AAPL and AMZN are almost 25% of the Russell 1000 growth index and each is over a 5% weighting which means it is effectively impossible to overweight all of them.
2) Also makes it difficult to be overweight any two of MSFT, AAPL and/or AMZN while having significant overweights in 2-3%ish index constituents like FB, GOOG/GOOGL, V.
3) Obviously there is no 5/25 rule for indices so this dynamic can get much worse and make it hard for growth funds to outperform their indices *if* the mega cap tech stocks continue outperforming.
4) This happened with Nortel in the Canadian market in 2000 and it was super painful for Canadian active fund managers. Sidenote: did not end well for Nortel.
Obviously there are many differences today vs. 2000; most notably valuation.
You can follow @GavinSBaker.
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