Summary

• Traditional equity benchmarks may provide less diversification than investors expect.
• Market capitalization benchmarks are being dominated by a narrower set of companies, as well as rising concentration across factors.
• Multifactor ETFs may help investors diversify unintended factor exposures embedded in traditional benchmarks and potentially reduce reliance on a single market regime.
• Multifactor strategies such as the iShares U.S. Equity Factor Rotation Active ETF and the iShares International Equity Factor ETF may help investors seek more resilient portfolio outcomes across changing market regimes.

By Eric Legunn, CFA

Why factor investing matters in concentrated markets

Concentration risk is one of the most talked-about concerns for investors in 2026. That isn’t surprising given the so-called Magnificent Seven stocks currently comprise nearly