Stock market broadening has lifted mutual fund returns, with Goldman Sachs analysts noting improved performance driven by diversified sector gains. The firm’s research highlights a shift away from tech-centric markets, as large-cap active mutual funds—managing $4.1 trillion in equity assets—see 57% outperforming benchmarks this year, the highest since 2007. This marks a stark contrast to recent years dominated by tech giants.The analysts attribute the rally to two key factors: first, the dispersion of S&P 500 returns reaching levels unseen since 1980, and second, reduced exposure to AI-vulnerable software stocks.

While concerns persist about AI’s impact on tech profits, Goldman notes that mutual funds have already scaled back tech bets since early 2024, limiting downside risks.Sector shifts are pronounced: funds are most underweight in information technology, while financials and industrials dominate overweight positions. Notable fund owners like F&G Annuities & Life and others have driven ownership surges in these sectors. Despite lingering AI uncertainty, Goldman deems software sector risks “limited,” as many funds have already trimmed exposure.

The broader market’s resilience and strategic rebalancing underscore mutual funds’ ability to capitalize on evolving investor sentiment.