Divide and Conquer: Active Equity Portfolio Management with Concentrated Benchmarks

Concentration has long been a challenge in certain markets, but even the broadest markets today are presenting similar difficulties for active managers. We analyze this investment problem from the perspective of both asset owners and active managers, to whom the capital is delegated. 

We investigate how the assignment of an investable capped benchmark can expand the range of opportunities for active managers, and study how a portfolio's characteristics vary with, for example, the active risk budget allowed by the asset owner. In addition to this asset-manager view, we show how to combine a capped-benchmark-based active portfolio with a concentrated "completion portfolio" in such a way that the asset owner can retain the benefit of potentially better active-manager performance and outcomes. 

Our simulation-based analysis indicates that in periods of high market concentration, both asset owners and asset managers could potentially benefit from considering a benchmark-splitting approach. 

©2026 With Intelligence. Republished with permission from the Journal of Beta Investment Strategies, from: Stuart Doole, Ashish Lodh, and Kumar Neeraj. 2026. "Divide and Conquer: Active Equity Portfolio Management with Concentrated Benchmarks." Journal of Beta Investment Strategies 17, no. 1 (spring). 

The authors thank Anurag Kumar for his contribution to this paper.