What themes are top managers saying are early and under-owned?

A significant, early-stage theme among top managers is the structural reallocation of capital into private markets. Large wirehouses and independent RIAs are just beginning to increase client allocations to private assets, with even seemingly small shifts from levels like **5% to 8%** representing massive capital flows into the space . This shift is driven by the view that much of the foundational technological innovation, particularly in AI, is now occurring within private companies, making exposure essential for understanding future public market trends . Concurrently, a strong consensus has formed around the opportunity in U.S. small-cap stocks, which are seen as under-owned and poised to benefit from improving fundamentals, cheaper relative valuations compared to large-caps, and potential future rate cuts [6, 9, 19, 30]. This view positions small-caps as a key area for alpha generation, distinct from the crowded large-cap momentum trades .

Beyond broad market caps, managers are identifying contrarian opportunities in sectors that have been neglected during the narrow, AI-driven rally [12, 20]. The healthcare sector, particularly biotechnology, is highlighted as a deep value opportunity, with its S&P 500 weighting having been **halved** as capital chased tech stocks [11, 16]. This has created historically cheap valuations for companies with irreplaceable data assets poised to benefit from AI integration [16, 24]. Similarly, "old economy" sectors like energy and utilities are seen as attractive due to years of underinvestment creating supply constraints and pricing power . The immense energy demand from AI data centers presents a novel, second-order way to invest in the AI theme by focusing on critical infrastructure inputs . Other out-of-favor areas seen as offering contrarian value include consumer internet businesses, which have been de-emphasized amid the focus on AI and SaaS , and corporate credit, which large asset managers view as cheap .

The most significant tension exists around the valuation and positioning in large-cap technology. While some data indicates extreme crowding, with nearly **20% of hedge fund clients** weighted towards semiconductors and European investors actively seeking to diversify away , a strong counter-narrative argues that high-quality growth companies are undervalued. This view is supported by observations of multiple compression, where stock prices have fallen despite rising corporate earnings estimates, creating a disconnect between market sentiment and strong fundamentals [8, 14]. Some analyses show relative valuations for the tech sector versus the ex-tech S&P are near 10-year lows, suggesting a prime opportunity to deploy capital into the world's best businesses at attractive multiples [8, 27]. This dislocation suggests that while the AI theme is popular, sophisticated investors believe the market is mispricing the long-term value of dominant, high-quality companies within the sector [25, 26].