Stock Rally Powers On as Active Funds Struggle to Keep Pace Due to Diversification Rules
• S&P 500 and Dow hit record highs as stock rally continues, powered by handful of mega-cap tech stocks
• Active fund managers struggle to keep up, as they face limits on overweighting top performers
• Investment Company Act of 1940 prevents funds from having >5% in one stock, >25% in a group
• This act requires diversified funds to be mostly liquid, investments spread widely
• Rules also limit mutual funds from becoming activist investors in companies they own