Alger Concentrated Equity ETF (CNEQ)

The Alger Concentrated Equity ETF (NYSE: CNEQ) holds about 30 to 40 US stocks, each picked by Alger’s investment team for potential growth. This is not an index fund. It is an actively managed bet on a handful of companies the manager thinks will outperform.

Why concentrated instead of diversified?

Most stock funds own 100, 200, or 500 different companies. The idea is simple: spread your eggs across many baskets so that if one basket tips, you do not lose everything. It works. A diversified portfolio is less volatile and less likely to crater.

But diversification comes at a cost. If you own 500 stocks, you own bad ones too. Some will disappoint. Some will be mediocre. Over time, the average of 500 mediocre holdings tends to underperform the average of 40 great holdings. This is math: if you remove the bottom half of your holdings and concentrate your money in the top half, the remaining portfolio should perform better (unless you are spectacularly wrong about which ones are the keepers).

CNEQ bets that Alger’s stock pickers are good enough to identify the keepers. Instead of owning everything, they own only what they think is best. This means CNEQ will outperform if Alger is right and lag or crash if Alger is wrong.

How Alger picks stocks

Alger is a growth-oriented asset manager. The stocks they buy tend to be companies in strong competitive positions with expanding markets, rising profit margins, and potential for sustained price increases. Tech, healthcare, and high-end consumer companies are typical homes for Alger picks.

The portfolio usually includes a mix of mega-cap names — companies everyone knows — and mid-cap companies that are less widely owned. The exact lineup changes; Alger does not publish detailed criteria for every purchase. But the broad philosophy is consistent: they are hunting for companies that can grow earnings faster than the market average, which often translates to outsize stock returns.

Concentration and volatility

Owning 35 stocks instead of 500 means that each position has real impact. If your largest holding (maybe 5–8% of the fund) rallies 50%, CNEQ bounces meaningfully. If it crashes 40%, CNEQ crashes too. This is the trade-off: the upside of outsized winners is real, but so is the downside of outsized losers.

CNEQ tends to be more volatile than a broad market index like SPY. In strong bull markets, this volatility is pleasant — the fund outperforms because growth stocks are in favour and Alger’s picks are outpacing the market. In downturns and in periods when growth is out of favour, the reverse happens: CNEQ underperforms and feels like a painful position to hold.

The active-management fee

CNEQ charges roughly 0.65–0.70% per year — much higher than a passive index ETF like SPY (0.03%) or VOO (0.04%), but lower than a traditional actively managed mutual fund. You are paying for Alger’s research, analysis, and trading activity. Whether that fee is justified depends on whether Alger’s picks beat the index by more than 0.65% per year after costs. Over long periods, most active managers do not; a few do.

Booms and busts in growth investing

Growth stocks — and concentrated growth portfolios especially — are cyclical. They tend to soar in periods of economic expansion, rising profit expectations, and low interest rates. They crash when the opposite occurs: recessions, lowered expectations, or rising rates.

CNEQ rode booming gains from 2016–2021 when growth was dominant and interest rates were falling. It suffered in 2022 when the Federal Reserve raised rates sharply and investors fled growth for defensive value and bonds. It recovered in 2023–2024 as enthusiasm for artificial intelligence and big-tech mega-caps returned. This pattern is typical for concentrated growth portfolios: feast or famine, not steady.

An investor holding CNEQ needs to stomach this swinginess. If your plan is to sell during a crash, concentrated growth funds are dangerous. If your plan is to hold through cycles, they can compound wealth over decades.

What CNEQ is not

CNEQ is not an index fund. It does not promise to match the market. It is a bet that Alger can beat the market by being selective. That bet might be right or wrong in any given year.

CNEQ is also not a hedge or a stability play. It moves with equity markets and often more dramatically than the average stock. If you own CNEQ to reduce risk, you have the wrong idea.

How to research CNEQ

Check Alger’s website and the fund’s fact sheet for the current top ten holdings. You will likely see a mix of large tech, healthcare, and consumer names. Monitor the fund’s quarterly performance against the S&P 500 and a growth-focused index like the Russell 1000 Growth. Over a full cycle (five to ten years), compare total returns and volatility. Watch Alger’s commentary on holdings — they publish annual letters and quarterly fact sheets that explain the reasoning behind buys and sells. Finally, ask yourself: do you believe Alger is skillful enough to consistently beat the market? If the answer is no, a passive index fund is cheaper and more honest. If the answer is yes, CNEQ is the way to place that bet.