Concentrated vs. Broad Market Exposure: How $FMKT Stacks Up
Key Highlights
FMKT offers a concentrated, actively managed alternative to broad index investing by targeting companies most sensitive to deregulation.
Unlike the S&P 500, FMKT intentionally emphasizes sectors such as energy, financials, industrials, and healthcare, where regulatory shifts can materially affect profitability.
Broad market indices can mask concentration risk due to heavy weighting in mega-cap technology stocks.
FMKT’s strategy seeks to translate regulatory change into potential earnings catalysts rather than relying on general market growth.
A blended approach combining broad exposure with targeted strategies like FMKT may help investors balance diversification with thematic opportunity.
Investors have long debated whether it is better to own the entire market or concentrate capital in a narrower set of high-conviction opportunities. That question has taken on renewed relevance as U.S. policy has shifted toward deregulation. Against this backdrop, the Free Markets ETF (FMKT) was launched with a focused thesis: that easing regulatory burdens can unlock value in industries historically constrained by government oversight. Unlike broad index funds designed to mirror the overall market, FMKT is actively managed and intentionally concentrated, selecting companies believed to benefit directly from deregulation. This contrast raises an important question for investors. How does a concentrated, policy-driven strategy compare with broad market exposure such as the S&P 500?
Where FMKT Places Its Bets
FMKT’s portfolio construction reflects a clear view of where deregulation may have the greatest economic impact. The fund emphasizes sectors such as energy, financials, industrials, and healthcare, industries where regulatory compliance often consumes significant capital and time. In these areas, even incremental policy changes can materially affect profitability.
Energy provides a clear example. Oil, gas, and utility companies face extensive permitting requirements and environmental regulations that can delay projects for years. In mid-2025, federal agencies began accelerating approval processes and rolling back certain energy rules, shortening timelines for new infrastructure and production projects. For companies operating in capital-intensive energy markets, faster approvals can translate directly into improved cash flow and returns.¹
Financials represent another key focus for FMKT. Regional and mid-sized banks have long operated under stringent capital requirements and merger restrictions. Recent regulatory shifts have relaxed oversight, allowing banks greater flexibility to deploy excess capital and pursue consolidation. Industry analysts estimate that U.S. banks collectively hold hundreds of billions of dollars in capital above regulatory minimums, capital that can now be used more productively through lending, investment, or acquisitions.² Regulators have also signaled a more accommodating stance toward bank mergers, particularly among regional institutions.³
Industrials and healthcare face similar dynamics. Manufacturers devote substantial resources to compliance with safety, environmental, and reporting standards. Any reduction in those costs can meaningfully improve margins. Healthcare providers and pharmaceutical companies operate within complex regulatory frameworks governing approvals, billing, and consolidation. Policy changes that streamline these processes can support faster growth and operational efficiency.⁴ FMKT’s strategy is built around identifying companies where regulatory relief may act as a catalyst rather than a marginal tailwind.
How Broad Market Exposure Actually Works
Broad market exposure, most commonly represented by the S&P 500, offers diversification across sectors and industries. With one investment, investors gain access to hundreds of large U.S. companies, reducing dependence on any single stock or theme. Over long periods, this diversification has historically smoothed volatility and helped to deliver growth alongside the U.S. economy.
However, diversification in the S&P 500 is not evenly distributed. Because the index is weighted by market capitalization, the largest companies exert disproportionate influence on performance. In recent years, a small group of mega-cap technology companies has accounted for a significant share of index returns. By 2025, the top five constituents represented roughly one-quarter of the index’s total weight.⁵ As a result, movements in a single sector can dominate overall performance even when most sectors are stable or rising.
This imbalance was evident in early 2025. During the first quarter, most S&P 500 sectors posted positive returns, including energy and several defensive industries. Despite that broad participation, the index declined overall, largely because technology stocks suffered sharp losses.⁶ Energy, by contrast, delivered strong gains, but its relatively small index weight limited its impact on total performance.⁷ In practice, broad exposure can mask underlying concentration, leaving investors more exposed to a handful of dominant sectors than they may realize.
Concentration Versus Coverage
FMKT takes a different approach. Rather than owning the market in proportion to size, it typically holds 30 to 50 stocks selected for their perceived sensitivity to regulatory change. The portfolio spans multiple industries and market capitalizations, but it is deliberately skewed toward areas where deregulation may have the greatest effect. Holdings have included regional banks, online brokerage platforms, and energy producers positioned to benefit from policy shifts.
This concentration allows FMKT to behave differently from the broader market. When its thesis aligns with prevailing conditions, the fund has the potential to meaningfully outperform broad indices. Early in its life, FMKT benefited from optimism surrounding deregulation, as investors began pricing in improved prospects for financials and energy-related companies. Over the same period, broad market performance was constrained by weakness in heavily weighted technology stocks.
The trade-off is volatility. A concentrated, thematic strategy tends to amplify market movements. FMKT has exhibited a higher sensitivity to market swings than the S&P 500, reflecting both its focused holdings and its exposure to cyclical sectors.⁸ When regulatory momentum supports its holdings, the fund can move sharply higher. When sentiment shifts or policy expectations change, declines can be equally pronounced.
Active management is another differentiator. FMKT’s managers can adjust holdings as conditions evolve, adding or removing positions based on how regulatory developments translate into company fundamentals. Broad index funds lack this flexibility, remaining fully invested regardless of changing conditions. That adaptability can be an advantage, but it also introduces execution risk. Investors must trust that management can correctly identify which regulatory changes matter and which are largely symbolic.
Blending Broad and Targeted Exposure
For many investors, the choice between concentrated and broad exposure need not be binary. Broad index funds can provide a stable core, capturing overall market growth with minimal oversight. Targeted strategies like FMKT can complement that foundation by expressing specific macro views. Allocating a portion of a portfolio to a thematic strategy allows investors to pursue potential upside without fully abandoning diversification.
FMKT’s appeal lies in its clarity of purpose. It offers a way to translate a policy view into portfolio exposure, focusing on companies where regulatory relief may meaningfully affect earnings and growth. Whether that thesis ultimately outperforms broad market exposure will depend on how policy evolves and how effectively the fund’s managers execute their strategy.
Conclusion
The contrast between FMKT and the S&P 500 highlights a fundamental investing trade-off. Broad market exposure offers stability and long-term participation in economic growth, but it can obscure concentration risks and dilute exposure to emerging themes. Concentrated strategies like FMKT accept higher volatility in exchange for the potential to outperform by focusing on specific catalysts.
FMKT reflects a belief that deregulation represents a structural shift rather than a temporary trend. For investors who share that view and are comfortable with a more focused approach, the fund offers a distinct alternative to traditional index investing. For others, it may serve as a satellite holding alongside broad exposure. In either case, the comparison underscores an enduring truth: investment outcomes depend not only on what is owned, but on why it is owned.
Consider FMKT. I believe in it. I wouldn’t have launched the fund if I didn’t.
Footnotes
Suzanne McGee, “US Firms Launch ETF to Capitalize on Trump’s Deregulation Push,” Reuters, June 10, 2025.
Tidal Investments LLC, “Tidal Investments LLC Launches the Free Markets ETF (FMKT),” Business Wire, June 10, 2025.
Federal Deposit Insurance Corporation, “FDIC Signals Shift in Bank Merger Review Process,” June 2025.
DJ Shaw, “New ETF Targets Companies Poised for Deregulation Relief,” ETF.com, June 11, 2025.
John Navin, “Top 25 Stocks in the S&P 500 by Index Weight,” Investopedia, August 1, 2025.
Visual Capitalist, “How Every S&P 500 Sector Performed in Q1 2025,” April 3, 2025.
Chandrima Sanyal, “Deregulation Is the New Stimulus—and This ETF Is First in Line,” Benzinga, August 5, 2025.
Public.com, “Free Markets ETF (FMKT) Fund Statistics,” data as of December 15, 2025.
FMKT, Fund Summary Prospectus, 2025.
Past performance is no guarantee of future results.
The Fund’s investment objectives, risks, charges, expenses and other information are described in the statutory or summary prospectus, which must be read and considered carefully before investing. You may download the statutory or summary prospectus or obtain a hard copy by calling 855-994-4004 or visiting www.freemarketsetf.com. Please read the Prospectuses carefully before you invest.
Investing involves risk including the possible loss of principal.
FMKT is distributed by Foreside Fund Services, LLC.
Find full holding details and learn more about FMKT at
http://www.freemarketsetf.com.
Holdings are subject to change.
Deregulation Strategy Risks.The Fund’s strategy of investing in companies that may benefit from deregulatory measures entails significant risks, including those stemming from the unpredictable nature of regulatory trends. Deregulation is influenced by political, economic, and social factors, which can shift rapidly and in unforeseen directions. Changes in government priorities, political leadership, or public sentiment may result in the reversal of existing deregulatory policies or the introduction of new regulations that could adversely affect certain industries or companies. Further, while the Fund invests in companies expected to benefit from deregulatory initiatives, not all of these companies may achieve the expected advantages, whether fully, partially, or at all. The actual impact of deregulatory measures may vary widely depending on a company’s specific operational, financial, and competitive circumstances. Companies may also face challenges adapting to new regulatory environments, or their competitive positioning may be undermined by other market factors unrelated to deregulation. These risks could negatively affect the performance of the Fund’s portfolio.
Underlying Digital Assets ETP Risks. The Fund’s investment strategy, involving indirect exposure to Bitcoin, Ether, or any other Digital Assets through one or more Underlying ETPs, is subject to the risks associated with these Digital Assets and their markets. These risks include market volatility, regulatory changes, technological uncertainties, and potential financial losses. As with all investments, there is no assurance of profit, and investors should be cognizant of these specific risks associated with digital asset markets.
● Underlying Bitcoin and Ether ETP Risks: Investing in an Underlying ETP that focuses on Bitcoin, Ether, and/or other Digital Assets, either through direct holdings or indirectly via derivatives like futures contracts, carries significant risks. These include high market volatility influenced by technological advancements, regulatory changes, and broader economic factors. For derivatives, liquidity risks and counterparty risks are substantial. Managing futures contracts tied to either asset may affect an Underlying ETP’s performance. Each Underlying ETP, and consequently the Fund, depends on blockchain technologies that present unique technological and cybersecurity risks, along with custodial challenges in securely storing digital assets. The evolving regulatory landscape further complicates compliance and valuation efforts. Additionally, risks related to market concentration, network issues, and operational complexities in managing Digital Assets can lead to losses. For Ether specifically, risks associated with its transition to a proof-of-stake consensus mechanism, including network upgrades and validator centralization, may add additional uncertainties.
●Bitcoin and Ether Investment Risk: The Fund’s indirect investments in Bitcoin and Ether through holdings in one or more Underlying ETPs expose it to the unique risks of these digital assets. Bitcoin’s price is highly volatile, driven by fluctuating network adoption, acceptance levels, and usage trends. Ether faces similar volatility, compounded by its reliance on decentralized applications (dApps) and smart contract usage, which are subject to innovation cycles and adoption rates. Neither asset operates as legal tender or within central authority systems, exposing them to potential government restrictions. Regulatory actions in various jurisdictions could negatively impact their market values. Both Bitcoin and Ether are susceptible to fraud, theft, market manipulation, and security breaches at trading platforms. Large holders of these assets (”whales”) can influence their prices significantly. Forks in the blockchain networks—such as Ethereum’s earlier split into Ether Classic—can affect demand and performance. Both assets’ prices can be influenced by speculative trading, unrelated to fundamental utility or adoption.
● Digital Assets Risk: Digital Assets like Bitcoin and Ether, designed as mediums of exchange or for utility purposes, are an emerging asset class. Operating independently of any central authority or government backing, they face extreme price volatility and regulatory scrutiny. Trading platforms for Digital Assets remain largely unregulated and prone to fraud and operational failures compared to traditional exchanges. Platform shutdowns, whether due to fraud, technical issues, or security breaches, can significantly impact prices and market stability.
● Digital Asset Markets Risk: The Digital Asset market, particularly for Bitcoin and Ether, has experienced considerable volatility, leading to market disruptions and erosion of confidence among participants. Negative publicity surrounding these disruptions could adversely affect the Fund’s reputation and share trading prices. Ongoing market turbulence could significantly impact the Fund’s value.
● Blockchain Technology Risk: Blockchain technology underpins Bitcoin, Ether, and other digital assets, yet it remains a relatively new and largely untested innovation. Competing platforms, changes in adoption rates, and technological advancements in blockchain infrastructure can affect their functionality and relevance. For Ether, the dependence on its proof-of-stake mechanism and smart contract capabilities introduces risks tied to network performance and scalability. Investments in blockchain-dependent companies or vehicles may experience market volatility and lower trading volumes. Furthermore, regulatory changes, cybersecurity incidents, and intellectual property disputes could undermine the adoption and stability of blockchain technologies.
Recent Market Events Risk. U.S. and international markets have experienced and may continue to experience significant periods of volatility in recent years and months due to a number of economic, political and global macro factors including uncertainty regarding inflation and central banks’ interest rate changes, the possibility of a national or global recession, trade tensions and tariffs, political events, war and geopolitical conflict. These developments, as well as other events, could result in further market volatility and negatively affect financial asset prices, the liquidity of certain securities and the normal operations of securities exchanges and other markets, despite government efforts to address market disruptions.
New Fund Risk. The Fund is a recently organized management investment company with no operating history. As a result, prospective investors do not have a track record or history on which to base their investment decisions.
. Lead-Lag Publishing, LLC is not an affiliate of Tidal/Toroso, Tactical Rotation Management, LLC, SYKON Asset Management, Point Bridge Capital, or ACA/Foreside.