Three new iShares “Mega-Cap” ETFs made their debut last Friday – the iShares Russell Top 200 Index Fund (IWL), the iShares Russell Top 200 Growth Fund (IWY), and the iShares Russell Top 200 Value Index Fund (IWX). All three funds seek to provide equity exposure to the largest of the large cap companies.
According to iShares, the Russell Top 200 Index “is a subset of the Russell 1000 Index and includes approximately 200 of the largest securities based on a combination of their market cap and current index membership, comprising approximately 65% of the US market”. The Russell 1000 Index represents approximately 1,000 of the largest securities and comprises nearly 90% of total US market capitalization.
The Russell Top 200 Growth Index tracks the largest 200 companies in the Russell 1000 exhibiting traditional growth characteristics such as higher projected future earnings growth and higher price-to-book ratios while the Russell Top 200 Value Index tracks the largest 200 companies in the Russell 1000 with lower projected future earnings growth and lower price-to-book ratios.
The new Mega-Cap ETFs provide investors with an easy way to gain targeted exposure to the largest companies in the equity universe, enabling investors to more easily overweight these stocks. Mega-Cap stocks are typically the largest, most stable companies and thus, investors may want to overweight them in times of market turmoil as a “safer” play than smaller, more volatile stocks.
