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Now, I'd love to know what you experienced last year around concerns on market concentration, being based in the US. But even when I traveled in Asia and Middle East, every conversation was about the Magnificent Seven. And is this a bubble, can it continue? And the most dangerous words in the investment language, is this time different? And year-to-date, we've seen the Magnificent Seven kind of break up. We've had the Fab Five, which I think is a play on a basketball team from the 1980s. And then we've had the Fantastic Four.
So we've seen some breakup there. But I checked, close of business Monday, in the S&P 500, the Magnificent Seven were still 28% of the index at MSCI ACWI, given outperforming the US. The US is at 63% of the index. And the Mag Seven are at 17%. So huge equity market concentration. The last two times we had this, in the US, it was the NIFTY 50, and then dotcom boom, which became the dotcom bubble. It didn't end well. So is it still coming up with clients despite some return dispersion there? And are you seeing clients do anything about it?
I think it's-- the massive single issue that people are talking about, particularly as there's no worse time in markets than when the simplest, cheapest thing has done better than all the other things. And so you wonder, well, why did I bother to diversify in the first place? I think the first thing to bear in mind is that we do have all seen the studies, Best and Binder and others, that a small number of companies do ultimately drive the stock market performance over the longer run. The trick is figuring out which ones will be there earlier. So market cap will always have that ability to take advantage of that.
However, I think as Nick White put it best, a lot of this, I think, boils down to your time frame. And what people are saying is if you can give it long enough, you can be on the right side of history. But if you're going to be judged over a short period of time, you may not be able to. So I think where people are getting to is what somebody once said is sin a little. They definitely want their equity exposure. They're definitely more worried about market cap. And it's figuring out with their governance whether they can take advantage of some of those newer opportunities that might arise in other areas.
I agree with you that governance is key. The clients I see that have either hedged the Mag Seven a bit or really focused on doubling down on other diversification because of concern about how long can this run. It's path-independent investors. It's investors that aren't benchmarked to a peer group median or where their stakeholders don't hold them hostage to MSCI ACWI performance. But most organizations aren't in that position. They have stakeholders that are going to either compare them to a peer group median or MSCI ACWI. And I think in that case, keeping your positions, even if you have a view, relatively risk constrained makes a lot of sense.
And I think the other thing to think about is those underlying style exposures, even taking something like value, for example. Maybe at an overall level, it hasn't worked. But there's been multiple markets where value has mattered a lot, where it has worked. Japan, for example, has been a really useful lens to try and find the winners from the losers, as that has come on. So just because at an overall level, there's a trend, doesn't mean that it's still not useful in slightly more micro ways.
And I suppose the thing I always have in the back of my head, and I think a lot of clients do, is this idea that the reason that a risk premium exists is that usually there are drawdowns to holding it. And it's just when everybody has left the building that it usually reverts back the other way.
It's interesting, I have to smile when I hear people say diversification hasn't worked. I'll tell you two quick stories. When I was with a corporate multinational, with their DC investment committee in the US, and we'd recommend having less home country bias than their peer group median. And they were unhappy that they'd underperformed the peer group median based on having less than the US. And I was there with their global treasurer.
And so I said, hey, John, tell your committee, in how many of the 45 countries that we work with you in was the advice to have less home country bias wrong? And he said, OK, 1 or 45. And he laughed, and I laughed. Because the US beat everything else. So it was in every other country, that less home country bias had paid off for participants, and the fiduciaries were happy.
He laughed, and I laughed. None of the other rest of the committee laughed. They were pretty locked into, versus our peer group medians in the US, we've underperformed, and so that path independence of your peer group median. But diversification had worked, just in every country other than the one leader, which happened to be the US market.
I also was hearing that a couple of years ago and then we had the 2021 drawdown where both stocks and long-term bonds were down and down by a lot. And private markets did so well that we had the denominator effect suddenly. And so diversification suddenly paid off. But memories are short. And so now we're back to, well, if you haven't been overweight US tech, you've underperformed.
And to go back to a point we made a second ago, is effectively, that committee didn't have the ability to be on the right side of history over the longer term. They were being focused by shorter-term comparisons to peer group medians. And if that's the case, you need to know what you're comparing against and size your risk budget accordingly.
The other thing, and it is worth remembering, there are very big stocks, but there are a lot of reasons we touched on the bubble word. And they may come up later on in conversation as well. But these are companies that are generating earnings. They are genuine market leaders in markets that reward the winners. There are reasons why they would be at these valuations, even if it may get a little bit stretched. It's not like the past when things were clearly an extrapolation.
I like that point. And I think it's worth noting that the Mag Seven or now the Fantastic Four, those are different business models. There's some overlap at the edge, but grouping these stocks is a bit of a mistake. And that's become apparent year to date, with two of them having negative returns, another one of the Seven being fairly flat. But they all do share digital characteristics, and winner take all, and scale dynamics. But different competitors, different regulatory dynamics, just a different path in terms of earnings growth.
It reminds me of grouping four emerging market countries as the BRICS. That probably didn't help emerging market exposures and picking the ones that had been a winner at a point in time. Those four didn't outperform the rest of the emerging markets on a go forward basis.
And it lets you also probably think about risk in a different sense than just quantitative. Because the risk here is a dominant player in a marketplace actually moves to government. It moves to antitrust, it moves to other areas like that.
Yeah, you reminded me. We have 49% of the world population going to the polls this year for the world's five most populous countries, experience elections, the EU parliament. And politicians don't like big companies. And attacking big companies seems to be politically popular. So antitrust enforcement will tend to focus on the largest players.
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