Rules-based refresh of index constituents based on updated Human Capital Factor® (HCF®) data (effective date February 15, 2026).
1. Executive Summary
The 2026 recast of the Human Capital Factor® (HCF) Large Cap Index resulted in a 153‑holding index with 36% turnover. The index added 55 new names and retained 98 names. At the top of the index, Amazon (AMZN) and Cisco Systems (CSCO) entered the top 10, while Home Depot (HD) and Visa (V) exited.
SECTOR WEIGHT SHIFTS
Sector weights shifted year over year, with additions in Industrials (+3.5%) and Technology (+3.0%) and reductions in Financials (‑3.5%) and Healthcare (‑1.0%). Sector‑weight shifts are driven by year‑over‑year Solactive GBS United States 500 Index sector changes. The largest changes within sectors are additions in Financials (+6 names), Consumer Services (+4), Healthcare (+3), Industrials (+3) and reductions in Technology (‑4), Materials (‑3), all driven by HCF® selection effects.
The team at Irrational Capital includes two thematic discussions in this report that seek to provide insight into the drivers of human capital leadership today:
- The 2026 thematic framing reflects an environment where Irrational Capital believes that artificial intelligence (AI) reduced operational friction, lifting innovation and organizational effectiveness, even as collaboration and alignment weakened. In that context, trust is positioned as the mechanism that could turn individual enablement into sustained organizational productivity.
- A long-tenured cohort of the HCF® Hall of Famers highlights companies that have been held in the index across the last three recasts since 2023, offering compelling insight through multiple reconstitution cycles.
2. Index Construction and Recast Process
The HCF® uses a proprietary methodology that measures intrinsic and extrinsic motivation among employees.
It seeks to quantify the link between workforce engagement and stock performance or, to put it another way, to show that "doing the right thing" could pay. The HCF® is built on data from private and public employee surveys, which are thoroughly reviewed for accuracy and robustness.
Irrational Capital, an investment research firm pioneering the connection between strong human capital management practices and future equity value, and the proprietor and specialists in data around the HCF®, believes that research increasingly seeks to show that companies with highly engaged and motivated employees tend to outperform their peers over the long term. Additionally, a Gallup study1 found that organizations with high employee engagement achieve 21% greater profitability, while a Harvard Business Review2 analysis linked strong workplace cultures to superior stock returns. The rationale is straightforward: Historically, when employees feel valued and motivated, productivity rises, innovation accelerates, and customer satisfaction improves—all of which appear to contribute to stronger financial results.
Understanding the Annual HCF® Recast
The Index is rescreened on the last trading day of January and rebalanced on the 10th trading day of February. During this process, employee sentiment data is collected and analyzed to generate new HCF® scores. The index is then rebalanced to maintain sector neutrality and stock caps, including a 5% individual weight limit.
The HCF® Large Cap Index follows a defined sequence from data processing to index construction and governance sign‑off.
The index is constructed from the Solactive GBS United States 500 Index universe, which is similar to the S&P 500 universe. It selects approximately the top 150 companies by HCF® score and weights constituents by market capitalization, subject to sector constraints tied to GBS 500 sector weights (as of 1/31/2026) and individual stock weights are capped at the lesser of 1) 5% and 2) 5 times its weight in the Index Universe. The process also includes risk and exposure testing and an investment committee sign‑off. This official recast is effective as of February 15, 2026.
Companies may be removed or not included in the HCF® Index for several reasons: they are no longer part of the underlying index universe, their HCF® score does not rank high enough to qualify for selection, or they are subject to upcoming corporate actions that warrant exclusion. Weight changes, meanwhile, are primarily driven by shifts in market capitalization and by changes to sector allocations in the underlying index.
3. Recast Results: Holdings, Turnover, and Sector Weights
The recast produced a 153‑holding portfolio with 36% year‑over‑year turnover, 55 new names and 98 names retained.
Top Holdings
The top 10 composition shifted modestly year over year. Amazon (AMZN) and Cisco Systems (CSCO) entered the top 10, while concentration increased slightly from 39.8% in 2025, to 40.5% in 2026. Mega‑caps continue to represent the top 30% of the portfolio.
Exhibit 1. Top 10 Holdings 2026
Source: Irrational Capital, February 2026. Holdings are subject to change.
Largest Weight Changes
Largest increases and decreases in weight year over year were widespread across sectors.
Exhibit 2. Changes in Weight (2026 vs. 2025)
Sector Changes
Sector weights shifted. Technology increased to 42.8% from 39.7% (+3.1%) and Industrials increased to 9.7% from 6.2% (+3.5%). Financials decreased to 12.6% from 16.1% (‑3.5%) and Healthcare decreased to 9.0% from 10.0% (‑1.0%). These changes reflect year‑over‑year shifts in S&P 500 sector weights.
Exhibit 3. Changes in Weight (2026 vs. 2025)
HCF® scoring impacts stock selection within each sector and the number of constituents per sector. Sector weight changes and membership count changes can move in different directions. For example, the total weight of Financials decreased, while six names were added. The total Technology weight increased, but the number of holdings was reduced by four names.
Exhibit 4. Membership Additions and Removals by Sector (2026 vs. 2025)
Top Holdings by HCF® Rank
A snapshot of top 2026 holdings by HCF® rank includes the following names and weights.
Exhibit 5. Top 2026 Holdings by HCF® Rank
4. The Potential Drivers of Human Capital Leadership Today
This section provides insight into the changes within the HCF® this year. While many elements of workplace culture evolve slowly, the framework is designed to capture meaningful shifts in how companies operate and lead, including Irrational Capital’s belief around the impact of Artificial Intelligence (AI), alongside the continuity reflected in companies who have been continually named to the HCF® Index.
The 2026 Workplace Backdrop: AI, Execution, and Trust
The 2026 framing focuses on a workplace reshaped by rapid AI adoption. Irrational Capital believes AI has removed operational friction, accelerating innovation and improving organizational effectiveness, but it has also eroded the collaborative “glue” that keeps teams connected, leaving many companies moving faster while feeling more internally disconnected as emotional connection and alignment declined.
In this context, Irrational Capital views how firms integrate AI is showing up in human capital outcomes: Companies that teach and equip employees to evolve with AI, rather than fear replacement, tend to score better in the HCF® model, reflecting stronger job security and clearer paths through transition. Irrational Capital believes the solution is trust. They think of AI as the engine and trust as the North Star; trust is no longer a nice‑to‑have, but the critical link that turns individual empowerment into institutional productivity.
Exhibit 6. The 2026 Model Showed Greater Emphasis On:
INNOVATION
How open organizations are to new ideas and ways of thinking across work activities, products, and processes.
ORGANIZATIONAL EFFECTIVENESS
Conditions that employees require in order to potentially be successful in their roles, including training, cooperation, and execution efficiency.
DIRECT MANAGEMENT
Quality of direct management and their ability to help employees grow, seek to be successful in their roles, to help achieve positive outcomes.
Continuity: HCF® Hall of Famers
A useful way to understand the index’s broad reach is to look at the constituents that have remained in the portfolio across multiple recast cycles.
HCF® Hall of Famers are companies that have been held across the last three recasts since 2023. This cohort provides a live‑implementation view of continuity and spans multiple sectors. It includes established Consumer and Financial franchises as well as Technology leaders, reflecting the broad reach of the HCF®.
Exhibit 7. HCF® All Stars
Important Information
1 Gallup, January 2023, “The Benefits of Employee Engagement”
2 HBR, March 2016, “28 Years of Stock Market Data Shows a Link Between Employee Satisfaction and Long‑Term Value”
The Human Capital Factor®, developed by Irrational Capital, seeks to identify and score companies on their management of human capital based on proprietary data and research, creating a systematic link between the workforce and potential equity performance.
The Human Capital Factor Large Cap Index consists of a modified market‑weighted portfolio of the equity securities of U.S. companies identified by Irrational Capital LLC (“Irrational Capital”) as those it believes to possess strong corporate culture based on its proprietary scoring methodology. Constituents eligible are chosen from Solactive GBS United States 500 Index (the “index universe”) at the time of Index reconstitution. The Solactive GBS United States 500 Index intends to track the performance of the largest 500 companies from the US stock market. The S&P 500 Index, or Standard & Poor's 500 Index, is a market‑capitalization‑weighted index of 500 leading publicly traded companies in the U.S. The indices listed are unmanaged and does not reflect fees and expenses and is not available for direct investment.
This material is intended solely for educational purposes, and should not be construed as investment advice, a recommendation, or an offer or solicitation to purchase or sell any securities. The opinion expressed are as of the date(s) indicated and are subject to change without notice. Reliance upon information in this material is at the sole discretion of the reader, investing involves risks, including the risk of loss. This information is not intended to be complete or exhaustive and no representations or warranties, either express or implied, are made regarding the accuracy or completeness of the information contained herein. This material may contain estimates and forward‑looking statements, which may include forecasts, and do not represents a guarantee of future performance. Past performance does not guarantee future results. Investors should consult with a financial professional before making any investment decisions. .
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