iAtoday

Speaking at the Defined Contribution Investment Forum 2026, hosted by Benefits Canada in Toronto on October 8, Philippe Guimont, Senior Investment Strategist, Group Benefits and Retirement Solutions, reflected on how evolving market dynamics may reshape one of the investment industry’s longest-running debates: active or passive management.

As markets become increasingly concentrated, assumptions that seemed self-evident a few years ago now warrant a fresh look.

A seemingly undeniable trend

Passive investing has been gaining momentum for more than a decade. In the United States, its share of the market grew from 34% to 55% between 2016 and 2025, while in Canada it rose from 11% to 23%.¹ Driven by lower costs and data showing how difficult it is to beat market indexes consistently over time, passive strategies now occupy a central place in institutional investment portfolios.

Beneath the surface, however, a deeper transformation is reshaping financial markets.

The real shift—market concentration

In several major stock market indexes, particularly in the United States, a handful of companies now account for a historically high share of market capitalization and investment returns. As an example, Apple, Nvidia and Microsoft each represented between 6% and 8% of the S&P 500 in 2025, whereas the largest company accounted for only about 3% of the index in 2005.

“It is tempting to view the recent struggles of active management as a reflection of management quality. Yet the data suggest that market structure has also changed significantly. The high level of index concentration has become an important factor in understanding some of the performance disparities.”

Philippe Guimont, Senior Investment Strategist, Group Benefits and Retirement Solutions

When a handful of stocks account for an outsized share of index performance, more diversified portfolios may have a harder time keeping up. This isn't a verdict on active managers. It reflects how much market structure has changed. Diversified managers who control risk and avoid heavy concentration can fall behind in a narrow market simply by doing what they were hired to do.

Beyond the active-passive debate

This evolution adds an important nuance to the debate. While passive strategies have benefited from the strong performance of a limited number of large companies in recent years, a broadening of market leadership could create more opportunities for some active approaches.

“The debate is not whether active or passive management is superior. The real issue is understanding the markets, asset classes and investment goals for which each approach is best suited.”

Philippe Guimont, Senior Investment Strategist, Group Benefits and Retirement Solutions

For plan sponsors, the focus is no longer simply on choosing between active and passive management. The greater challenge is understanding how structural shifts in the markets affect risk, opportunity and long-term portfolio decisions.

Rethinking long-held assumptions

Against this backdrop, three key questions should guide the conversation:

1. At what point does market concentration become a risk factor that should be monitored?
2. In which asset classes is active management most likely to generate value?
3. How can active and passive strategies work together within a plan, whose primary objective is to serve plan members’ needs?

“More than ever, plan sponsors need to move beyond conventional thinking. Sound decisions are those informed by data, market characteristics and the real-world needs of plan members. Those decisions have a direct impact on the level of diversification plan members can access, the fees they pay and how their savings are exposed to changing market conditions.”

Philippe Guimont, Senior Investment Strategist, Group Benefits and Retirement Solutions

¹ Morningstar.