BlackRock has just launched a new ETF — the iShares S&P 500 3% Capped ETF TOPC — and it's a pretty interesting move in response to growing concerns about market concentration. The ETF tracks the S&P 500 3% Capped Index, which limits the weighting of individual stocks to no more than 3%.
This approach redistributes excess weight from mega-cap stocks like Big Tech (which has been underperforming this year) to smaller constituents within the index, aiming to provide a more balanced market exposure.
Note that the Big Tech stock-focused fund — Roundhill Magnificent Seven ETF MAGS — has lost 21.6% so far this year (as of April 17, 2025).
Inside TOPC
The fund’s five holdings are: Microsoft (3.02%), Apple (2.87%), NVIDIA (2.77%), Amazon (2.74%) and Meta (2.55%). Financial Services (10.16%), Software & Services (9.01%) and Media & Entertainment (7.73%) are the top three sectors of the fund. TOPC’s expense ratio is 0.15% and net expense ratio is 0.09%.
In contrast, the regular S&P 500 ETF VOO puts 7.24% focus on Apple, followed by NVIDIA (6.07%), Microsoft (5.84%), Amazon (3.93%) and Meta (2.88%). The VOO ETF charges 3 bps in fees (read: 5 Good ETFs to Invest in and Forget).
Diversification Offered by TOPC
By capping the influence of large-cap companies like Apple, Microsoft and NVIDIA — which have recently surpassed 6% each in uncapped benchmarks — TOPC encourages greater issuer and sector diversification.
Part of the iShares Build Suite
TOPC is part of BlackRock’s iShares Build suite — a collection of core, low-cost ETFs intended for both retail and institutional investors. Following a recent expense reduction, TOPC now offers a competitive net expense ratio of 0.09%, making it an accessible option for those seeking strategic market exposure.
How Does It Fit in the Portfolio?
As a handful of tech giants increasingly dominate the market, TOPC is as a timely innovation for those looking to reduce concentration risk while retaining broad-market participation.
To ensure continuous exposure, especially during index rebalancing periods, the ETF is permitted to allocate up to 20% of its net assets to futures, options, or cash strategies. This flexibility supports the fund’s goal of maintaining consistent and diversified coverage of the S&P 500 universe.
Any Competition?
While most S&P 500-based ETFs follow the regular index,Invesco S&P 500 Equal Weight ETF RSP is a little different and can offer competition to the newbie TOPC.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.
Get it free >>This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
