Nvidia is a single-stock lively administration wrecking ball | USAEMALL.com

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Somehow, unbelievably, despite FTAV being assured by many investors and analysts that this would be a fab year for active management, stockpickers are once again underperforming the stock market,.

It hasn’t been a bad year, per se. The average active large-cap US equity fund is up 20 per cent this year, net of fees, according to UBS. If sustained that would make 2024 one of the better years on record.

The problem is that the S&P 500 has returned 22.1 per cent as of the end of last week, once you include dividends. The 2.1 per cent active undershoot is the greatest since at least 2019, according to UBS figures.

To an extent this is natural in a market environment where larger stocks are still doing better than smaller ones (despite valiant attempts by the latter to upend things this year).

Active managers mostly underweight larger stocks, because it just looks embarrassing if your top 10 holdings basically mimic the index. Indeed, UBS’s equity strategist Patrick Palfrey estimates that 77 per cent of US stockpickers are below their benchmarks in terms of size.

Oftentimes, certain sectors doing unusually well can also wreck the industry’s year. But in 2024 it’s not sectors or really even large-caps in general that are ruining performance. Overwhelmingly it’s just one stock: Nvidia.

There’s a zoomable image here, but if you don’t want to squint then we can just tell you that UBS estimates that Nvidia alone accounts for 1.43 per cent of the 2.1 per cent YTD underperformance of US large-cap active managers. That is nearly twice as much as the next nine biggest performance drags combined.

Nvidia has see-sawed since its June peak, but is down about 13 per cent from that high. Active managers will be hoping the air keeps coming out of the chipmaker’s stock — but that the overall market somehow stays buoyant.