Jerry Hendricks
Portfolio Manager
The Advisor’s Corner: Dealing with Concentration Risk
09/26/2025
1. Concentration risk continues to increase amongst passive indices
2. Making investment reviews with your advisor even more important
3. Focus on diversification via alternative assets and active strategies
As year-end approaches and conversations turn towards investment reviews with an eye on rebalancing client portfolios, advisors are often caught balancing between prudent portfolio management and a client’s desires to hold the most headline grabbing stocks. But some clients may not realize how much some of those newsworthy names impact the major indices and investment funds. We have all heard the adage “don’t put all your eggs in one basket,” but often there are unintended increases in concentration without realizing it, particularly given how the top weights have behaved recently. In fact, recent analysis shows that the top 10 stocks within the S&P 500 make up 40% of the weight within the index.
As our astute ETF strategist, Todd Sohn, notes, investors who think they are diversifying their portfolios using various investment funds may end up owning more of those newsworthy securities than they realize given their weights within the following well followed and owned ETFs:
And while this may not end up becoming a problem, it can increase concentration risk. This give and take argues for having your portfolio professionally managed with top advisors ensuring their clients are diversified – either via alternative assets or via the use of active investment solutions. As year end conversations move into portfolio rebalancing, it becomes important to stress how a lack of diversification has the potential to expose their portfolio to considerable drawdowns should we witness a notable downturn in those top holdings should their investments not be adequately diversified. Strategas’ Ryan Grabinski notes that while the growth rates in EPS for 2026 are expected to show healthy increases, the Magnificent 7 names are expected to witness steady declines in those same growth rates. If earnings truly begin to slow for those top weighted names, it is possible that their performance begins to lag.
Source: Strategas, Bloomberg as of September 16, 2025
Note: Coined by Bank of America, the Magnificent 7 or MAG7 stocks are a group of high-performing and influential companies in the U.S. stock market made up of the following stocks: Alphabet, Amazon, Apple, Broadcom, Meta Platforms, Microsoft, and NVIDIA.
Providing options for diversification to combat some of the aforementioned concentration risk, we believe alternative assets and active portfolios offer two options advisors can present to their clients. And at Strategas Asset Management we have developed three active ETFs, each with a high active share suggesting notable diversification away from their benchmarks.
Our Active ETFs:
The Strategas Macro Thematic Opportunities ETF (Ticker SAMT) is an actively managed ETF which invests in 3-5 macro themes at one time. Derived directly from our research, we select themes believed to be the most impactful ones in the market. The Fund’s thematic positioning is adjusted based on shifts in macro trends to ensure the integrity of each theme’s investment thesis and the relevancy of its constituents. Our thematic rotation allows you to remain invested in multiple single themes at one time without having to trade in and out when a theme runs its course - such as the case with single themed products - providing an opportunity to maintain the tax efficiency set up ETFs provide. Our current themes are De-Globalization, Cash Flow Aristocrats, Artificial Intelligence, Industrial Power Renaissance, and Consumer Spending Wave.
A more secular product offering comes via our Strategas Global Policy Opportunities ETF (SAGP). SAGP was crafted with the goal of identifying US large-cap, US small and mid-cap, and non-US large-cap companies that we feel are best positioned for an earnings benefit from policy changes. Thematic rotation within this portfolio comes naturally as companies adjust lobbying efforts based on the changes in the makeup of the parties in Washington. Of note, this is a politically agnostic portfolio with each company immersed in significant efforts lobbying the US government.
The Strategas Macro Momentum ETF (Ticker SAMM), our latest offering, is a tactical, actively-managed ETF which leverages nearly two decades of Strategas' proprietary technical and macro research to identify timely investment opportunities with compelling risk/reward profiles. Investing in 20 to 50 U.S. listed securities, this portfolio provides exposure to those tactical themes we believe are currently exhibiting strong technical, momentum, and relative strength characteristics, with rotation occurring within the portfolio based on changes in the technical backdrop.
For additional information on our thematic ETFs please visit https://www.strategasetfs.com/.
This communication represents our views as of 9/26/2025, which are subject to change. The information contained herein has been obtained from sources we believe to be reliable, but no guarantee of accuracy can be made. This communication is provided for informational purposes only and should not be construed as an offer, recommendation, nor solicitation to buy or sell any specific security, strategy, or investment product. This communication does not constitute, nor should it be regarded as, investment research or a research report or securities recommendation and it does not provide information reasonably sufficient upon which to base an investment decision. This is not a complete analysis of every material fact regarding any company, industry, or security. Additional analysis would be required to make an investment decision. This communication is not based on the investment objectives, strategies, goals, financial circumstances, needs or risk tolerance of any particular client and is not presented as suitable to any other particular client. Past performance does not guarantee future results. All investments carry some level of risk, including loss of principal.
Carefully consider each of the Funds' investment objectives, risk, and charges and expenses. This and other information can be found in the Funds' summary or full prospectus which can be obtained by calling (855) 273-7227 or by visiting strategasetfs.com. Please read the prospectus, carefully before investing.
Strategas Asset Management, LLC serves as the investment advisor for each Fund and Vident Advisory, LLC serves as a sub advisor to each Fund. The Funds are distributed by SEI Investments Distribution Co. (SIDCO), which is not affiliated with Strategas Asset Management, LLC or any of its affiliates, or Vident Advisory, LLC or any of its affiliates.
Shares of any ETF are generally bought and sold at market price (not NAV) and are not individually redeemed from the fund. Brokerage commissions will reduce returns.
An investment in the Fund involves risk, including possible loss of principal.
In addition to the normal risks associated with investing, the Strategas Global Policy Opportunities ETF (SAGP) is subject to lobbying focused investment risk. The adviser's investment process utilizes lobbying intensity as the primary input when selecting investments for the Fund's portfolio and does not consider an investment's traditional financial metrics. The Fund may underperform other funds that select investments utilizing more traditional investment metrics. The Fund may also focus its investments in a particular country or geographic region outside the U.S. and may be more susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries within that country or geographic regions well as risks of increased volatility and lower trading volume.
In addition to the normal risks associated with investing, the Strategas Macro Thematic Opportunities ETF (SAMT) is subject to macro-thematic trend investing strategy risk. Therefore, the value of the Fund may decline if, among other reasons, macro-thematic trends believed to be beneficial to the Fund do not develop as anticipated or maintain over time, or the securities selected for inclusion in the Fund's portfolio do not perform as anticipated.
In addition to the normal risks associated with investing, the Strategas Macro Momentum ETF (SAMM) may invest in smaller companies, heavily in specific sectors, and also invest in gold, all of which can exhibit high volatility. Securities may be difficult or impossible to sell at the time and the price desired. Investments with exposure to international markets may experience capital loss from unfavorable fluctuation in currency values, differences in generally accepted accounting principles, or from social, economic or political instability in other nations. REITs are subject to changes in economic conditions, interest rates, and credit risk. MLPs involve risks related to limited control and limited rights to vote on matters affecting the MLP. MLP common units and other equity securities can be affected by economic and other factors affecting the stock market in general, expectations of interest rates, investor sentiment towards MLPs or the energy sector, changes in a particular issuer's financial condition, or unfavorable or unanticipated poor performance of a particular issuer. MLP investments in the energy industry entail significant risk and volatility.
The Funds may be more heavily invested in particular sectors and may be especially sensitive to factors and economic risks that specifically affect those sectors.
The Advisor’s Corner: Dealing with Concentration Risk
Sep 26 2025