Implications of Russell 1000 Growth Index Concentration

The Concentration Problem

If the long-term case for growth investing is straightforward, the case for accessing it through a passive growth benchmark has continued to become more complicated. The top 10 holdings in the Russell 1000 Growth Index now account for 57% of the index — more than double their average weight over the past three decades (Exhibit 2).

For most of the index’s history, top 10 weights oscillated between 20% and 35%. Recent levels are without precedent, and were reached in a remarkably short window: top 10 weights have nearly doubled since 2013, driven by a handful of mega-cap names whose market values have grown faster than the rest of the universe combined.

As a result, a benchmark that was historically a broad expression of secular growth has become, in practice, a concentrated wager on a few of the world’s largest businesses.

In addition to being heavily concentrated in just a handful of individual stocks, 54% of the Russell 1000 Growth Index is in the technology sector. And when you add tech-related names from other sectors, that number soars to 73% (Exhibit 3).

As this dynamic has taken hold at the sector level, a new area of concentration has emerged. Semiconductors’ share of technology has surged as the industry transitions toward a structurally higher‑quality, more durable revenue model. As a result, the Russell 1000 Growth Index’s concentration at the industry level has increased significantly as well (Exhibit 4).

As a result of concentration at several levels of the Russell 1000 Growth Index, the benchmark’s risk profile has been amplified (Exhibit 5). The Index is being driven less by broad market exposure and more by company- and sector-specific outcomes. The index’s beta factor bias has increased and its tracking error versus the S&P 500 index has climbed, with a growing share of that tracking error coming from stock-specific differences. Higher tracking error means higher active risk, which may be unwelcome to passive investors as, in practical terms, they are taking on more concentrated, idiosyncratic risk than the “broad growth index” label may imply. Alternatively, higher active risk may present an opportunity for skilled stock pickers to beat the benchmark.

The Mag 7 Growth Deceleration

While the Magnificent 7 have been among the fastest growers for years, the reality today is that the cohort’s growth rate has been slowing. They are no longer among the top quintile of growers in the Russell 1000.

The 5-year average earnings per share growth for the Mag 7 was 30% through June 2026. Looking ahead, the 3-year average forward earnings per share growth for the Mag 7 is 23%, which represents a 20+% decline (Exhibit 6). The law of large numbers is doing what it usually does to dominant incumbents: making the next double harder than the last. These companies are on a path of normalization toward a still-attractive but no-longer-exceptional growth rate. The companies that were the index’s growth engine are now poised to grow roughly in line with, rather than well ahead of, a long list of less dominant peers.

None of this is a critique of the Magnificent 7 as businesses. These are high-quality companies with durable competitive advantages, exceptional cash generation, and a leading position in the AI build-out. This is simply what mega-cap scale eventually does to the rate of growth.

Positioning for the Next Generation of Leaders

At Jennison, we look for two types of growth companies – those with above-average and potentially accelerating growth and those with more stable and consistent growth (Exhibit 7).

The first are generally the emerging winners in a new and evolving industry or inflecting growers that are innovating within an existing way of doing business. Companies such as these have large and expanding addressable markets and are investing significantly in growth, understating their profits. Many times the market underappreciates the scale of opportunity as they produce earnings that are well below their potential and before the opportunity is fully reflected in benchmark weights. By design, those companies are underrepresented or absent from a top-heavy passive index.

The second are durable compounders — the “aircraft carriers” with defensible business models, significant competitive moats, and long runways of growth ahead of them. These stable growers are high-quality companies, generally with pristine balance sheets, and significant cash flow generation. The market often underestimates the duration of growth of these companies, and the better-than-average returns that their consistent, above-average growth can drive. Many of today’s mega-caps fit this profile.

History shows that market leadership is dynamic: the companies that dominate one era seldom lead the next with the same force. For growth investors, the opportunity is not to abandon proven leaders, but to complement them with emerging winners and inflecting growers that benchmarks may not yet fully recognize. This is where active, diversified growth investing can add meaningful value.

The Russell 1000 Growth benchmark has quietly become a concentrated bet on a handful of mega-cap technology names whose growth is now decelerating. A highly concentrated index means that passive performance becomes dependent on the continued success of a small group of stocks. It does not provide investors with the flexibility to pivot if fundamentals deteriorate or no longer support valuations, nor does it protect from downside risk if leadership changes. In our view, a broader, more diversified growth portfolio gives investors a way to participate in today’s leaders while also owning the businesses most likely to drive the next decade of returns.