On Wednesday, BlackRock debuted its latest fund, the iShares S&P 500 3% Capped ETF (TOPC).
The fund’s objective is to offer distinct capped exposure to the equities within the S&P 500. Following a fee waiver, the fund has a net expense ratio of 9 basis points.
“TOPC introduces a timely innovation to help investors build their core U.S. equity exposure,” said Elise Terry, head of U.S. iShares at BlackRock. “Combining the potential benefits of greater sector diversification and comparable exposure to the broad market index, TOPC is another testament to our dedication to equipping investors with a simple toolkit to navigate today’s equity markets.”
Solving Concentration Risk
The fund looks to achieve its investment objective by tracking the S&P 500 3% Capped Index. This index provides exposure to the S&P 500, but caps company weight at a max of 3%.
Excess weight that is shaved off of the largest S&P 500 companies are then redistributed to companies that have not yet reached the 3% cap. Given that TOPC focuses on the S&P 500, the ETF holds notable exposure to the technology and financial sectors.
Primarily, the lion’s share of TOPC’s assets are invested in securities within the tracked index. However, the fund may opt to invest up to 20% of net assets into futures, options, cash strategies, and more.
Given the volatile state of the U.S. market, going for pure cap-weighted large-cap exposure can inflict undue risk. As such, TOPC can help investors mitigate volatility by aiming for a more diversified large-cap weighting.
“Concentration risk remains a concern for many investors, and we think this new iShares ETF could garner interest,” noted Todd Rosenbluth, head of research at VettaFi. “It is like the low-fat version of everyone’s favorite ice cream in an ETF format.”
As one of the leading providers of ETF strategies, BlackRock currently has more than 450 ETFs listed in the U.S. Its ETF library represents over $3 trillion in assets under management.
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