TOPC: BlackRock Caps Mega-Stocks at 3% with New ETF
- TOPC is the first S&P 500 ETF with 3% company weight cap, addressing market concentration.
- The ETF aims to provide balanced exposure to the largest US companies.
- It joins the iShares Build ETF toolkit with $18 billion in managed assets.
BlackRock, Inc (BLK) launched the iShares S&P 500 3% Capped ETF (TOPC) Wednesday, providing an alternative for investors concerned about the outsized influence of mega-cap stocks in the U.S. equity market.
The new ETF seeks to provide balanced exposure to the S&P 500 companies while preventing any single stock from dominating performance, addressing a growing concern that just seven companies are now worth more than the entire $15 trillion U.S. stock market valuation from 2000, according to a press release announcing the fund.
TOPC Aims for Diversified Index Exposure
"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, in the company's announcement. Terry added that the fund aims to offer greater sector diversification while maintaining comparable exposure to the broad market index.
According to the prospectus, the fund tracks the S&P 500 3% Capped Index, which caps individual company weights at 3% during quarterly rebalancing. When a stock exceeds that threshold, its excess weight is redistributed to the remaining holdings based on market capitalization.
BlackRock has set TOPC's expense ratio at 0.15% but, as stated in the prospectus, a contractual fee waiver reduces the net expense ratio to 0.09% through April 2026.
A Tool for Portfolio Diversification
The ETF addresses shifts in market concentration that have seen technology giants increasingly dominate index performance. While the iShares S&P 500 ETF (IVV) now has approximately 32% exposure to information technology, TOPC reduces that to 23%, based on data provided by BlackRock.
The fund also reduces mega-cap concentration compared to traditional S&P 500 ETFs. While the top 20 mega-caps represent 48% of IVV, they account for just 38% of TOPC, according to BlackRock. TOPC's capping mechanism creates a more balanced sector allocation, with financial services representing 16% of the fund compared to 14% in IVV.
TOPC joins BlackRock's "iShares Build" lineup, which the company describes as an equity toolkit providing "portfolio building blocks to help manage U.S. market-cap exposure." According to the press release, BlackRock manages more than $18 billion across this ETF family.
The fund launched with approximately $5 million in assets and 500 holdings as of April 15, according to iShares.
