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Passive funds come out on top while stock pickers bleed: 2025 was another punishing year for active equity managers. About USD 1 tn was pulled from active equity mutual funds, extending outflows to an 11th straight year, while passive equity ETFs pulled in more than USD 600 bn, according to Bloomberg Intelligence estimates.

Concentration did the damage: A small cluster of US mega-cap tech stocks accounted for an outsized share of market gains, reinforcing a decade-long pattern. Investors trying to keep up with the market have been increasingly cornered into holding those stocks (and little else), leaving diversified portfolios at a disadvantage.

The hit rate collapsed: Roughly 73% of US equity mutual funds trailed their benchmarks in 2025, the fourth-worst showing since 2007. Underperformance worsened after April’s tariff scare faded and AI enthusiasm reasserted tech leadership.

Breadth never showed up: On many days this year, fewer than one in five stocks rose alongside the broader market. The S&P 500 consistently beat its equal-weighted version — a clear signal that gains remained narrow and unforgiving for stock pickers.

Active still worked, just not at home: A handful of managers outperformed by stepping far outside US large caps. Dimensional Fund Advisors’ International Small Cap Value portfolio gained just over 50%, driven by exposure to non-US financials, industrials, and materials rather than Big Tech.

Why 2025 felt harsher than usual: The Financial Times points out that this year’s gainers were dominated by AI-linked stocks, Asian chipmakers, defense names, and precious metals, while US consumer and advertising stocks lagged — reinforcing sector and regional divides that made broad-based alpha elusive.

The identity crisis of “active”: With deviation proving costly, many funds drifted closer to index weights, blurring the line between active and passive while still charging higher fees. Bloomberg says that dynamic has made investors increasingly unwilling to pay for underperformance.

MARKETS THIS MORNING-

Asia-Pacific markets are starting the final trading week of the year on a mixed note. Japan’s Nikkei is down 0.5%, while Hong Kong’s Hang Seng Index and the Shanghai Composite are in the green in early trading. US futures are mostly trading flat ahead of the market opening later today.

THE CLOSING BELL-

The ADX was flat on Friday on turnover of AED 428.4 mn. The index is up 6.5% YTD.

In the green: Abu Dhabi National Co. for Building Materials (+4.6%), Sharjah Cement (+3.0%) and RAKBank (+2.8%).

In the red: Hayah Ins. (-6.0%), Aram Group (-2.4%) and Americana Restaurants (-1.8%).

Over on the DFM, the index fell 0.1% on turnover of AED 191.5 mn. Nasdaq Dubai also closed flat on Friday.

CORPORATE ACTIONS — Salama widens the foreign-investor gate

Islamic Arab Ins. (Salama) is resetting who can own its stock. The insurer has raised the cap on non-UAE ownership to 49% from 25%, according to a DFM filing (pdf). The change — which takes effect 31 December and preserves a 51% minimum for UAE and GCC shareholders — broadens access to the company’s stock as it works through a balance sheet reset.

The bigger reset: The ownership tweak comes as Salama advances a two-step solvency plan we’ve been tracking, combining a share-capital reduction to offset accumulated losses with a planned AED 175 mn mandatory convertible sukuk to rebuild capital and meet Central Bank requirements.

CORPORATE ACTIONS — Aman plans for a restructure

Aman reports heavy losses, CEO to step down: Dubai Islamic Ins. and Reins. Company’s (Aman) board of directors has initiated a company-wide restructuring plan after the firm incurred losses exceeding AED 195 mn in 3Q 2025, equivalent to 86% of its paid-up capital, according to DFM disclosures here (pdf) and here (pdf). The company’s CEO Rached Diab (LinkedIn) has also resigned, citing personal reasons, according to a separate disclosure (pdf). Diab will retain his position until 31 March, 2026.

Behind the heavy losses: The deficit points to Aman’s longstanding ins. challenges, with the company citing subsidiaries and investments as the main reasons for its accumulated losses. The insurer scrapped a turnaround strategy that would have seen it exit the ins. sector and transition into an investment vehicle after counterparties terminated the underlying agreements.

Looking ahead: Aman will notify shareholders of Diab’s successor upon finalizing requisite procedures and obtaining the necessary approvals from the Central Bank of the UAE and regulatory authorities. The company expects to benefit from a projected upward performance in the local economy, according to a separate disclosure (pdf).