I am not so sure about the relevance of the conclusion that any restriction imposed on a fund that mandates holding anything other than the best idea stocks negatively affects a fund’s alpha. Restrictions regarding TE and active sector weights could in theory constrain the PM to include active bets outside the top 20. But the article does not show that it actually does. It is as plausible that the PMs simply have too many low conviction active bets instead of concentrating on what they know most about. There are other methods of neutralizing unwanted factor exposures than forcing low conviction bets into the portfolio.