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JONATHAN ELEY: In 1986, the talismanic German football manager Franz Beckenbauer took a team of basically also-rans so the World Cup final. And right now, German software giant SAP is carrying another team-- the European technology sector.
Take a look at this chart. It shows SAP's market value as a percentage of two European technology indices. This one company is around a quarter of the Stoxx 600 tech index's market value. Adjust for the free float-- that's the portion of a company's shares that are available to trade-- and the percentage rises to almost 30.
Why does this matter? Well, because if you invest in a passive fund that tracks this index, you may be more exposed to a single stock than you imagined. And if you're an active manager, a big chunk of your performance might depend not on your stock picking skills, but on how your allocation to SAP compares to that of the index.
Such overweighting is not exactly a new phenomenon. Back in the tech boom in the late '90s, Nokia accounted for about 70% of the Helsinki stock market. And in 2011, NASDAQ had to change the rules to reduce the growing weight of Apple in its indices.
Now, it's very unlikely that we will see Nokia-style weightings in a major market again. But the fact that SAP is 30% of Europe's tech index, when rival Oracle, a bigger company, is only 3% of the equivalent US index-- well, that just shows how far ahead Silicon Valley is. Europe, it seems, needs more Beckenbauers.