BlackRock (NYSE:BLK) has introduced the iShares S&P 500 3% Capped ETF (NYSE:TOPC), the first U.S. ETF to limit the weight of individual stocks to 3% in the S&P 500 universe.
The new fund comes at a time when only seven companies now represent over $15 trillion in market value, about the same as the size of the entire U.S. stock market in 2000.
This increasing concentration has raised alarm about the volatility and unevenness of classic cap-weighted indexes.
TOPC seeks to mitigate that risk by tracking the S&P 500 3% Capped Index, which redistributes excess weights from mega-cap stocks to the index’s smaller constituents. The strategy maintains broad market exposure while encouraging more issuer and sector diversification.
The fund is part of the iShares Build suite. That’s BlackRock’s core building-block ETFs created for retail and institutional investors to gain low-cost, versatile market exposure. After an expense reduction, TOPC has a net expense ratio of 0.09%.
Whereas its exposure is mostly consistent with the legacy S&P 500, TOPC restricts market giants Apple, Microsoft, and Nvidia to being over-exposed, which recently topped 6% weightings in uncapped benchmarks.
The ETF can invest up to 20% of net assets in futures, options, or cash strategies in order to provide exposure during index rebalancing. The core sector exposures are technology and financials, aligned with the rest of the market, but slightly more balanced tilted.
With 468 ETFs according to Stock Analysis, BlackRock’s new launch highlights its continued effort to provide precision instruments for investors managing a market increasingly dominated by a few tech behemoths.
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