Institutional Model

Commentary

Fourth Quarter 2025 Active Equity Allocation Report

Two leading indicators—stock-level return correlation and volatility from stock-specific risk—improved significantly in Q3.

Key Takeaways

Stock-level correlation and volatility driven by stock-specific risk each improved significantly across major equity indexes in Q3 vs. Q2, despite lower total volatility.
If these trends continue, it could lead to more stock picking opportunities for active managers in the fourth quarter of 2025—and possibly beyond.
International developed markets (the MSCI EAFE) displayed the greatest number of positive risk indicators based on active-management characteristics.
High concentration and low volatility continued to present headwinds for active managers in the S&P 500 index, although performance dispersion by sector may present opportunities.

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Fourth Quarter 2025 Active Equity Allocation Report

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Fourth Quarter 2025 Active Equity Allocation Report

Two leading indicators—stock-level return correlation and volatility from stock-specific risk—improved significantly in Q3.

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