Stock pickers have long sought to beat the market, and most continue to fail, with the rate of underperformance of U.S. large-cap mutual funds, after fees, against the S&P 500
between 80%-90% of all funds over a decade. But there are ways to think about generating what is known as alpha — outperformance of a benchmark — at a broader portfolio construction level, using strategies that involve assets from cash to bonds to commodities. This approach is a focus for asset management firms from Pimco to State Street Investment Management, both of whom joined this week’s CNBC “ETF Edge” to discuss where they are looking for differentiated returns outside the U.S. large-cap stock market.
These managers are not saying that the U.S. stock market won’t continue to do well. But amid big swings in equity markets on geopolitical headlines, macro uncertainty, and central bank interest rate policies around the world that are diverging, the classic advice to seek diversification in a portfolio and make tweaks on the margins may lead to a little extra juice in 2026 returns.
Matthew Bartolini, State Street
Investment Management’s global head of research strategists, noted that 2025 was the first year since 2019 that stocks, bonds, gold and commodities all outperformed cash. “That’s where the idea of craftsmanship alpha or portfolio construction alpha can come from, not beating an index alpha,” he said.
