Global markets have had a bumpy start to 2026. But even sharp selloffs in the tech sector, particularly software, were followed by a strong rebound in April.
Big tech firms have seen years of standout performance and this significant growth means they now make up a much larger part of global benchmarks. While this momentum has continued, returns are increasingly driven by a small number of very large companies.
So, as benchmarks become more concentrated, even portfolios built using broad, low‑cost tracker funds might not be as diversified as they once were.
This is a good reminder for investors to check whether their investments are still in line with their expectations and whether diversification is doing the job they think it is.
This article isn’t personal advice. All investments can rise and fall in value, so you could get back less than you invest and past performance isn’t a guide to the future. If you're not sure if a course of action is right for you, ask for financial advice.
Let’s look at the world’s biggest market
The US is the biggest stock market in the world, and the S&P 500 is widely regarded as the best measure of its performance. It’s also the main index that has become increasingly concentrated.
While not all the ‘magnificent seven’ tech companies – Nvidia, Apple, Microsoft, Amazon, Alphabet, Meta and Tesla – have performed as strongly so far this year, their overall performance for several years has been very strong. So, they’re now a significant proportion of the S&P 500. In fact, the ten biggest companies now make up close to 40% of the index, more than double the level seen ten years ago.
In terms of sectors, technology and communication services now account for around 46%, up from roughly 22% ten years ago.
These sectors don’t even include companies like Amazon or Tesla, which sit under the consumer discretionary sector. But when you do include these companies, it makes the index even more tech concentrated.
As a result, like with concentrated funds, the performance of just a handful of companies can have a significant impact on overall US market returns.
Going global doesn’t always mean spreading risk
Strong performance from the US in recent years means it also has come to dominate global benchmarks.
The US now accounts for around 72% of the MSCI World Index, compared with around 50% 15 years ago. Once again, technology and communication services feature heavily, making up more than a third of the index, roughly double their share a decade ago.
A broad global index tracker fund typically has a large exposure to both the US and the technology sector. And if you’re holding a global tracker alongside a US tracker, there will be a significant overlap in sectors and companies, increasing your reliance on the same small group of companies.
Concentration isn’t just a US story
This trend isn’t limited to the US.
In Asia, Taiwan and South Korea have grown in importance following a strong year for their equity markets. Each is now bigger than the entire UK stock market.
For Taiwan, much of this growth can be traced back to a single company – Taiwan Semiconductor Manufacturing Company (TSMC).
As the world’s leading advanced chipmaker, TSMC has been a major beneficiary of rising demand for chips used in artificial intelligence (AI). TSMC now accounts for roughly 20% of the FTSE World Asia-Pacific ex Japan Index, up from around 10% just three years ago.
What does this mean for portfolios?
In many cases, broad low-cost index funds that track the performance of a single index remain a good option for investors. They can be used to build an entire investment portfolio or used as the core to which other active funds or more specialist investments can be added.
In some markets, they can also be a good choice if you’re looking to get notable exposure to leading, dominant companies. But remember these companies can have a significant impact on overall performance, especially if these markets become concentrated.
On the other hand, actively managed funds can usually only invest a maximum of 10% in a single company. So, in the case of Asia for example, if TSMC continues to perform better than others in the index, an active fund might lag as it can’t invest in as much as the index. However, they may perform better if market leadership changes or a broader set of companies perform well.
Ultimately the goal is balance. A well‑diversified portfolio spread across different sectors, regions and investment styles is the key.
3 fund ideas using different investing styles
Investing in these funds isn't right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest and make sure any new investment forms part of a long-term diversified portfolio.
For more details on each fund, its charges, and specific risks, see the links to their factsheets and key investor information.
iShares Pacific ex Japan Index
The iShares Pacific ex Japan Equity Index fund provides low-cost diverse exposure to countries like Taiwan, South Korea, and Australia.
It aims to track the FTSE World Asia Pacific ex-Japan Index, rather than trying to outperform it. The fund invests in around 600 companies and currently has 35% invested in the technology sector. TSMC accounts for a large part of the fund at 20%.
The fund includes investments in higher-risk emerging markets. It can also use securities lending, which adds risk.
An index tracker fund is one of the simplest ways to invest. This fund could be a great, low-cost starting point to add diversification to a global investment portfolio aiming for long-term growth.
Annual percentage growth
Apr 21 – Apr 22 | Apr 22 – Apr 23 | Apr 23 – Apr 24 | Apr 24 – Apr 25 | Apr 25 – Apr 26 | |
|---|---|---|---|---|---|
iShares Pacific ex Japan Equity Index | -0.60% | -4.49% | 9.72% | -1.97% | 81.79% |
The period between 30 April 2021 and 30 April 2022 reflects the performance of the Class D version of the fund, due to when the Class S version was launched.
FSSA Asia Focus
The FSSA Asia Focus fund aims for long-term growth by investing in high-quality companies across the Asia Pacific region. This includes both developed economies and higher risk emerging markets.
The managers take a high‑conviction approach, meaning the fund can look quite different to the broader Asian stock market. Exposure to technology is lower than the benchmark, although the sector still represents 28.3% of the fund.
TSMC makes up 9.8% of the fund, close to the 10% limit for a single holding in an active fund, but less than its 14.1% weighting in the benchmark.
This fund could complement more adventurous Asian funds or provide exposure to the Asian market as part of a globally diversified investment portfolio.
Annual percentage growth
Apr 21 – Apr 22 | Apr 22 – Apr 23 | Apr 23 – Apr 24 | Apr 24 – Apr 25 | Apr 25 – Apr 26 | |
|---|---|---|---|---|---|
FSSA Asia Focus | -3.50% | 1.09% | -2.58% | 3.13% | 23.59% |
MSCI AC Asia Pacific ex Japan | -9.23% | -5.21% | 8.29% | 3.94% | 42.44% |
T.Rowe Price Global Value Equity
The T. Rowe Price Global Value Equity fund aims to deliver long-term growth by investing in companies across the globe. It uses a value investing approach, which means investing in companies where the manager believes the share price doesn’t reflect a company’s long-term potential.
The fund invests in 80-100 companies. 51.4% of the fund’s currently invested in the US, although this is less than the amount in its global benchmark. It also has less exposure to the technology sector.
The manager has the flexibility to invest in emerging markets and smaller companies, both of which can increase return potential but do add risk.
This fund could work well alongside a more growth-focussed fund or add diversification to a global investment portfolio. We think it offers something different from other global funds.
Annual percentage growth
Apr 21 – Apr 22 | Apr 22 – Apr 23 | Apr 23 – Apr 24 | Apr 24 – Apr 25 | Apr 25 – Apr 26 | |
|---|---|---|---|---|---|
T. Rowe Price Global Value Equity | 7.02% | 0.01% | 19.54% | 0.43% | 40.29% |
MSCI World | 6.86% | 3.61% | 19.41% | 5.60% | 27.47% |
The period between 30 April 2021 and 30 April 2023 reflects the performance of the Class I version of the fund, due to when the Class C version was launched.