For instance, the PowerShares QQQ (NasdaqGM: QQQ), which tracks the NASDAQ-100, includes AAPL 14.5% and MSFT 8.7%. The iShares U.S. Technology ETF (NYSEArca: IYW) has a 19.6% position in AAPL and 11.7% in MSFT. The Technology Select Sector SPDR (NYSEArca: XLK), the largest tech-related ETF, includes AAPL 16.9% and MSFT 10.1%.
Year-to-date, QQQ rose 18.7%, IYW gained 19.0% and XLK increased 18.0. In contrast, the S&P 500 was up 12.4% so far this year.
Lee also mentioned that many fund managers missed out on the rally in the utilities sector – the Utilities Select Sector SPDR (NYSEArca: XLU) jumped 21.4% year-to-date. The utilities sector would have made up 25 basis points of the underperformance in the active fund space. [Epic Fail: Passive S&P 500 ETFs Crushing Actively Managed ETFs]
Additionally, some argue that active managers are having trouble picking out winners in a highly correlated equities market where low dispersions among industry groups have made it harder to pick out individual winners. Consequently, with more stocks moving in lock step, investors could be better served picking a cheap and passive ETF instead.
For more information on funds and ETFs, visit our mutual funds category.
Max Chen contributed to this article.