- Geographic diversification across major benchmark indices may be insufficient to ensure that a portfolio is sector-risk averse.
- Following the 2022 tech stock sell-off, the U.S. market, represented by the S&P 1500 Index, still has substantial exposure to the sector. As of 30 June 2023, the Index’s total tech exposure, based on Syntax’s classification methodology, is 40%, which is significantly higher than the 27% reported by S&P for the Information Technology sector.
- The International Developed ex-U.S. market, represented by the MSCI EAFE Index, has significant allocations to the Industrials (21%) and Financials (19%) sectors. MSCI EAFE also has the largest allocation to the Consumer sector (13%) across the three market categories.
- Emerging markets, represented by the MSCI Emerging Markets Index, is overweight Financials (23%), with Banking (17%) as the largest component. Tech exposure (34%) also poses a potential concentration risk.