If you hold an Irish pension or an ARF invested in a global equity index fund, you have almost certainly been told you are diversified. Thousands of companies, dozens of countries, one fund. Job done.

But: Here is the number that should give you pause. As at the end of June 2026, the United States accounted for 72.45% of the MSCI World Index. Not a plurality. Not a large slice. Just under three-quarters of a fund whose name contains the word "World".

I have been reading a piece by David Bahnsen, a US investment manager, on the five things currently concerning him about markets. It is American commentary written for American investors, and I will come back to why that distinction matters. But his first concern travels further than he probably intended, because it lands squarely in an awful lot of Irish pension funds.

The Comfortable Assumption

The logic most people have absorbed goes something like this. Individual shares are risky. Index funds hold everything. Therefore an index fund is the safe, sensible, diversified option, and once you own one you have dealt with concentration risk.

The first two statements are broadly true. The conclusion does not follow.

A cap-weighted index does not hold everything equally. It holds more of whatever has already gone up, by design, and it keeps buying more of it as it keeps going up. That is not a flaw in the construction; it is the construction. But it means the answer to "how concentrated am I?" changes over time without you doing anything, and without anyone writing to tell you.

We have argued before in simplicity tends to beat sophistication in Irish pension planning, and nothing here changes that. A low-cost global index fund remains, for most people, a far better answer than an expensive active fund or a portfolio of individual bets. The point is narrower and more specific: knowing what you actually own is part of owning it properly.

What the US Commentary Actually Says

Bahnsen's argument is worth stating fairly, and worth labelling clearly as what it is: analysis of the US market, using US data, written for US clients.

His central observation is a comparison with 1999. In the dotcom era, he argues, the damage was severe but the exposure was narrower — a high percentage of investors genuinely did not own the speculative funds and did not hold the technology names on margin. Today, he suggests, a great many people believe they are not exposed to the most vulnerable part of the market, and because of how index concentration has developed, they are. Significantly so.

He puts a figure on it: the ten largest companies in the S&P 500 now represent roughly 38.4% of that index. He also flags retail speculation, citadel alone recorded around $6.8 billion of daily option premium from retail investors in June, some 65% above the 2025 average, and a growing "too big to fail" dependency running through the AI supply chain.

Those are US figures about a US market. Read on their own, they tell an Irish retiree nothing actionable. So let us do the translation properly.

Now Put Irish Numbers On It

Take a fictional scenario. Seamus is 65 (I made him up but not the numbers by the way), retired two years, with €900,000 in an ARF invested in a single global equity index fund.  

At the June 2026 index weights, here is what Seamus actually owns:

• €652,050 in United States equities — 72.45% of the fund

• €239,400 in just ten companies — the top ten holdings, 26.6% of the fund, every one of them US-listed

• €272,430 in a single sector — information technology, at 30.27%

• €48,600 in his single largest holding alone, at 5.40%

The five largest holdings between them — Nvidia, Apple, Microsoft, Amazon and Alphabet — account for 18.49% of the fund — €166,410. Nearly a fifth of Seamus's retirement, in five companies, in one country, in broadly one industry.

Now, Seamus did not choose any of that. He chose "global equities" and a low charge, which was a perfectly sensible decision. The allocation above is simply what that decision has turned into while he was getting on with his life. Right.

Where It Collides With Revenue

Here is the part that makes this an Irish planning question rather than an interesting chart.

From age 61, Revenue's imputed distribution rules require Seamus to draw a minimum of 4% of his ARF each year. That rises to 5% from 71, and to 6% where combined ARFs and vested PRSAs reach €2m. On €900,000, the 4% floor is €36,000 a year, and it applies whether markets are up or down, and whether he wants the income or not.

So Seamus is a forced seller. Every year. Of a portfolio in which a fifth of the value sits in five companies.

That is precisely the mechanism behind [sequence-of-returns risk in the first decade of drawdown](https://www.informeddecisions.ie/post/sequence-of-returns-risk-ireland), with an added wrinkle. It is one thing to be a forced seller into a broad market decline. It is another to be a forced seller into a decline concentrated in the handful of holdings that make up the largest part of your fund, at the exact point in your life when you have the least time to wait for a recovery.

The accumulator has a different problem and, frankly, an easier one. If you are 52 and still contributing, concentration is a volatility question. If you are 65 and drawing €36,000 a year because Revenue says so, it is a sequencing question. Same fund. Very different exposure.

What This Is Not

I want to be careful here, because this is exactly the sort of piece that gets read as a sell signal, and it is not one.

It is not a forecast. Nobody actually knows whether the concentrated part of the market will fall, or when, or by how much. Bahnsen is careful to say his concerns are not attached to a specific prediction on a specific timeline, and I would say the same. The future outcome here is unknowable by anyone.

It is not an argument for cash. Moving a retirement portfolio to deposits to avoid concentration risk swaps a manageable problem for a guaranteed one. Over a retirement that might run thirty or forty years, inflation does more reliable damage than volatility ever has. That was the substance of the research we looked at on: what default lifestyling strategies actually cost over a long retirement, and the conclusion has not changed.

It is not an argument against indexing. The alternative on offer is usually higher fees and a manager who may or may not add value, and the independent evidence on that is not kind. Indexing still wins for long-term investors.

What it is, is an argument for knowing your actual exposure, and for deciding deliberately whether you are comfortable with it. Being 72% invested in one country because you looked at it and concluded that was reasonable is an entirely different position from being 72% invested in one country because nobody mentioned it.

What You Can Actually Do

Three practical steps, none of them dramatic.

Find out what you hold. Ask your provider or adviser for the fund's country weights, sector weights, and top ten holdings, as at the most recent date available. Not the brochure description. The actual factsheet. If a fund cannot produce that in a week, that in itself is worth knowing.

Separate the accumulation question from the drawdown question. If you are still contributing, the honest answer may well be that concentration is a feature you are paid to tolerate. If you are drawing income under the imputed distribution rules, the same allocation carries a different risk, and it deserves a different conversation.

Look at where the mandatory withdrawal is coming from. The 4% is not optional. Whether it comes out of the most concentrated part of your portfolio in a bad year, or from somewhere you have deliberately set aside for exactly that, is optional. That is a structural decision, and it is one of the few genuinely controllable variables in the whole picture.

Final Thoughts

The uncomfortable thing about concentration risk is that it does not announce itself. It builds quietly, inside a product you bought precisely because you wanted to stop worrying about this sort of thing, and it is largest at the moment it matters most.

Ultimately, it is a case of looking at what you own rather than what you were told you own, and then deciding whether the answer still suits the stage you are at. For some people it will. For others, particularly those already drawing an income, it may not. Neither answer is wrong. Not looking is the only genuinely bad option.

I hope this helps.

Paddy Delaney QFA RPA APA

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