iShares Core Equity ETF (XEQT) Review
On our journey to analyze some of the most popular exchange-traded funds (ETFs) in the investment world, we talked about BMO ETFs and Vanguard ETFs so far. However, this effort will not be complete without BlackRock iShares ETFs, which is the leading ETF manager in the world. To add some context to this claim, BlackRock boasts 389 different ETFs in the US market and 157 ETFs in Canada. These are more than its rival BMO and Vanguard ETF counts put together. In this article, we will be exploring the infamous iShares Core Equity ETF, ticker symbol; XEQT, listed in the Toronto Stock Exchange (TSX).
With over $2 trillion in assets under management and over 900 investment products, BlackRock is one of the leading players in the fund management game. This gives them the luxury of dropping their management fees and further attracting investors. In 2019, BlackRock entered into a strategic alliance with Canada’s RBC Global Asset Management to introduce the iShares brand for ETFs.
The iShares Core Equity ETF (XEQT) is a fan-favorite in the investment world. This ETF is notoriously famous for its equity holdings and the long-term consistent returns it has provided to its investors. The fund achieves this objective by investing in BlackRock’s own set of ETFs that invest in the broad equity market. This helps the fund achieve a vast diversity across industries, regions, company sizes, and growth potentials.
Investing in its own ETFs also ensures that XEQT fees are kept at the bare minimum–which is always a nice thing to have.
BlackRock describes XEQT as “A simple and efficient way to gain exposure to a portfolio of ETFs that is broadly diversified across regions, in one convenient package.”
| Quick Facts | XEQT.TO |
|---|---|
| Fund inception date | Aug 7, 2019 |
| Net Assets (Jan 7, 2022) | $891 million |
| Exchange | Toronto Stock Exchange |
| Annualized distributions yield | 2.24% |
| Distribution frequency | Quarterly |
| Management expense ratio | 0.20% |
| Account eligibility | TSFA/RRSP/RESP/RRIF/DPSP |
XEQT ETF only boasts a measly 2.24% annual distribution yield. This is likely less than the inflation rate of most countries in the world. However, the investment objective of the fund is not dividends. The fund more than makes up for the distributions with its capital gains–or, at least, it has done historically.
BlackRock rates iShares Core Equity ETF (XEQT) at medium-low risk investment. This does sound pretty accurate based on the level of diversification the fund is able to achieve through its holdings.
iShares Core Equity ETF (XEQT) Holdings
The XEQT fund only invests in 4 other ETFs owned and managed by BlackRock itself. On top of this, they hold some cash in both USD and CAD for liquidity purposes. Within these four ETFs, the fund invests in about 9,600 individual companies, bonds, and other securities.
Below are the holdings of XEQT and their respective weightage in the fund as of January 6, 2022.
| Ticker | Holding Name | Weightage |
|---|---|---|
| ITOT | iShares Core S&P Total US Stock Market ETF | 48.06% |
| XIC | iShares Core S&P/TSX Capped Composite Index ETF | 24.24% |
| XEF | iShares Core MSCI EAFE IMI Index ETF | 22.88% |
| IEMG | iShares Core MSCI Emerging Markets ETF | 4.72% |
| Cash (USD & CAD) | 0.1% |
Through these four ETF holdings, XEQT is able to diversify across the United States (47%), Canada (23%), Japan (5%), the United Kingdom (3%), China (1.6%), and so on. This can be considered quite well-diversified across different regions of the world.
XEQT’s investment in iShares Core MSCI Emerging Markets ETF (IEMG) is evidence that the fund is not complacent with established companies and their mediocre growth rates. The emerging markets usually provide the highest growth potentials (but also include some risk as well).
iShares Core Equity ETF (XEQT) Performance
XEQT ETF is a fairly new fund having been incorporated in 2019. However, within these three years, the fund has been able to attract almost $1 billion Canadian dollars of investments. This speaks volumes about its popularity. However, for a fund that seeks to provide long-term capital gains, this ETF has not been active for a long enough time period for conclusive analysis.
During its run, XEQT has been able to provide 44% returns to its investors since inception. In dollar terms, an investment of $10,000 in the fund in 2019, would have grown to about $14,447 by 2022. This is an average annual return of over 16%, which is exceptionally high. However, this performance is mostly attributed to the recent bull run in the technology sector (XEQT’s two biggest individual holdings are Apple Inc (2.69%) and Microsoft Corp. (2.37%)).
The above graph shows the dip of the 2020 Coronavirus induced market crash in March 2020 and the recovery since. The global equity markets are quite volatile at the moment but ‘today’ is always the best time to invest.
Is XEQT ETF for You?
XEQT ETF is a fan-favorite for a reason. The fund aims to provide capital appreciation over the long run. So, if you have time on your hand to let your investments sit and grow for a while, XEQT might be your golden ticket. While the fund relies on safer bets such as developed markets, it also targets aggressive growth through its investments in emerging markets. A high level of diversification will ensure that your funds are rather safe from market dips. There is a little distribution bonus attached to the fund as well.
Disclosure: Any information given in this article is not to be construed as investment advice. You must do your own research before investing any money in the stock market. All investments carry inherent risks even with the possibility of losing all your money.
