Long-term institutional investors have maintained a persistent underweight stance toward U.S. softlines equities, according to research from Evercore ISI. The 25 largest mutual funds in the S&P 500 have held the softlines group at about 76% of its benchmark weight, a structural shortfall that has been in place for the past three years and remained roughly unchanged over the three months through June.
Evercore's work points to a broader reallocation of attention toward technology and AI-related equities as one driver of that trend. By the end of June, softlines accounted for 14 fewer basis points of the S&P 500 than it did in March, and the sector represented 25 fewer basis points than it did three years earlier, a decline Evercore attributes to shifting investor focus.
The boutique's coverage focuses on eight softlines companies that are included in the S&P 500: Nike, TJX Companies, Ross Stores, Ulta Beauty, Deckers Outdoor, Ralph Lauren, Tapestry and Lululemon. Among those names, the largest mutual funds were underweight six relative to each stock's index weighting, Evercore reports.
Nike diverges from that pattern. Mutual funds held Nike at 157% of its S&P 500 weighting, making it the most over-owned name in the cohort. Evercore cautioned that Nike's ongoing challenges in athletic apparel, when combined with elevated ownership, establish a difficult near-term technical backdrop for the stock.
Ross Stores has been the principal beneficiary of repositioning among large funds. By the end of June, funds held Ross at 103% of its index weight, compared with 70% for TJX Companies - a gap that represents the widest advantage for Ross in at least three years.
Analysts at Evercore have placed Ross in their Top 5 Outperform group, citing initiatives they expect will help accelerate two-year stacked same-store sales growth in the second half of 2026. At the same time, the bank noted that TJX's track record of consistent performance makes it less likely that funds will remain underweight the off-price retailer for an extended period.
Context and implications
- The data indicate a durable under-allocation to softlines by the largest mutual funds, which could influence stock-level liquidity and relative performance among apparel and specialty retail names.
- Technology's rising prominence within portfolios has coincided with a measurable decline in softlines' share of the S&P 500, suggesting sector-level flow dynamics tied to broader market preferences.
- Within the softlines group, Ross has seen improving fund positioning while Nike's heavy ownership combined with operational headwinds creates a challenging technical setup.
Conclusion
Evercore's analysis describes a sector that remains structurally under-owned by the largest mutual funds, even as select names such as Ross benefit from reallocation. The report highlights both the broader sector-level shift away from softlines and the divergent positioning among individual companies that could shape near-term performance.