Latest Launch: A Trio of Russell 200 MegaCap ETFs

by: Ron Rowland

A new trio of mega-cap ETFs from Barclays were launched last Friday (9/25/09), but investors failed to take notice and the first trades didn’t cross the tape until Monday. The new ETFs are all based on Russell 200 indexes, which track the largest 200 US-based companies: iShares Russell Top 200 Index Fund (NYSEARCA:IWL) (IWL overview), iShares Russell Top 200 Value Index Fund (NYSEARCA:IWX) (IWX overview), and iShares Russell Top 200 Growth Index Fund (NYSEARCA:IWY) (IWY overview).

The objective, transparent Russell methodology for slicing the market into various capitalization segments is widely respected. Other ETFs based on Russell capitalization and style categories are among the most widely traded “style-based” ETFs. We have no reason to doubt these new products will be any different.

A brief comparison of sector weightings and top stock holdings of the three new products can be found in the table below. Note the expense ratio of 0.15% for IWL is less than the 0.20% for the growth and value versions. Russell indexes are reconstituted annually based on their market capitalization at the end of May.

New iShares Russell Top 200 ETFs

New iShares Mega-Cap ETFs Russell 200 Value Russell 200 Russell 200 Growth
Number of Stocks 125 193 134
Expense Ratio 0.20% 0.15% 0.20%
--- Sector Weightings ---
Technology 3.8% 18.5% 33.1%
Health Care 11.2% 14.5% 17.8%
Financials 23.9% 14.4% 5.1%
Energy 22.2% 13.0% 4.0%
Consumer Staples 5.2% 10.5% 15.7%
Consumer Discretionary 8.7% 10.2% 11.6%
Producer Durables 10.7% 9.8% 8.9%
Utilities 12.0% 6.0% 0.2%
Materials 2.5% 3.0% 3.6%
--- Top Stocks ---
Exxon Mobil (NYSE:XOM) 6.7% 4.5%
Microsoft (NASDAQ:MSFT) 2.6% 5.2%
General Electric (NYSE:GE) 4.7% 2.3%
Proctor & Gamble (NYSE:PG) 2.3% 2.9%
Johnson & Johnson (NYSE:JNJ) 2.2% 3.4%
JP Morgan Chase (NYSE:JPM) 4.4% 2.2%
Apple (NASDAQ:AAPL) 2.2% 4.3%
IBM (NYSE:IBM) 2.1% 4.2%
AT&T (NYSE:T) 4.3 2.1%
Bank of America (NYSE:BAC) 3.9 1.9%

Investors can now choose from at least ten ETFs covering the US mega cap equity space: the three new ETFs from iShares plus iShares S&P 100 Index Fund (NYSEARCA:OEF), iShares NYSE 100 Index Fund (NYSEARCA:NY), Rydex Russell Top 50 (NYSEARCA:XLG), PowerShares Active Mega-Cap Portfolio (NYSE:PQZ), and Vanguard’s trio of Vanguard Mega Cap 300 ETF (NYSEARCA:MGC), Vanguard Mega Cap 300 Growth ETF (NYSEARCA:MGK), and Vanguard Mega Cap 300 Value ETF (NYSEARCA:MGV).

Disclosure: No positions