Launched on 10/12/2017, the Principal U.S. MegaCap ETF (
USMC Quick Quote USMC - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Large Cap Blend segment of the US equity market.
The fund is sponsored by Principal Funds. It has amassed assets over $1.47 billion, making it one of the larger ETFs attempting to match the Large Cap Blend segment of the US equity market.
Why Large Cap Blend
Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.
Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.12%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.82%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Information Technology sector--about 29% of the portfolio. Healthcare and Consumer Staples round out the top three.
Looking at individual holdings, Apple Inc Common Stock Usd.00001 (
AAPL Quick Quote AAPL - Free Report) accounts for about 6.75% of total assets, followed by Berkshire Hathaway Inc Cl B Common Stock Usd.0033 ( BRK.B Quick Quote BRK.B - Free Report) and Coca Cola Co/the Common Stock Usd.25 ( KO Quick Quote KO - Free Report) .
The top 10 holdings account for about 37.05% of total assets under management.
Performance and Risk
USMC seeks to match the performance of the Nasdaq US Mega Cap Select Leaders Index before fees and expenses. The Nasdaq U.S. Mega Cap Select Leaders Index uses a quantitative model designed to identify equity securities of companies with the largest market capitalizations in the Nasdaq US 500 Large Cap Index, with higher weights given to securities that are less volatile.
The ETF has lost about -13.28% so far this year and it's up approximately 0.44% in the last one year (as of 05/10/2022). In the past 52-week period, it has traded between $37.75 and $44.69.
The ETF has a beta of 0.90 and standard deviation of 21.65% for the trailing three-year period. With about 46 holdings, it has more concentrated exposure than peers.
Principal U.S. MegaCap ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, USMC is a reasonable option for those seeking exposure to the Style Box - Large Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Core S&P 500 ETF (
IVV Quick Quote IVV - Free Report) and the SPDR S&P 500 ETF ( SPY Quick Quote SPY - Free Report) track a similar index. While iShares Core S&P 500 ETF has $282.95 billion in assets, SPDR S&P 500 ETF has $357.88 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%. Bottom-Line
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit
Zacks ETF Center.