IShares Core S&P 500 ETF IVV combines a broadly diversified portfolio of U.S. large-cap stocks with low turnover and a miniscule price. This provides a durable edge over its Morningstar Category peers, earning it a Morningstar Analyst Rating of Gold. 

The strategy replicates the flagship S&P 500, which is a market-cap weighted basket of about 500 of the largest U.S. stocks. Rather than index rules dictating construction, an index committee has discretion over selecting stocks that meet certain liquidity and profitability standards. The index then weights the chosen constituents by their market cap. While a committee-based approach lacks transparency, it adds flexibility to reduce unnecessary changes during reconstitution. This tames transaction costs compared with more-rigid rules-based indexes.

U.S. large-cap stocks attract liquidity and widespread attention, such that new information is quickly reflected in prices. Market-cap weighting is a sensible approach here. It harnesses the market’s collective wisdom of the relative value of each holding with the added benefit of low turnover and associated trading costs. 

However, market-cap weighting may expose the index to significant stock- or sector-level concentration during the market’s intermittent manic episodes. This can tilt the portfolio toward richly valued names or sectors, as was the case during the post-lockdown rally in 2020. In the long run, the benefits of broad diversification, low turnover, and a low fee outweigh these drawbacks.

Analyst Rating

One of the cheapest S&P 500 index-trackers.

Associate Analyst

Mo'ath Almahasneh

Microsoft

Apple

Amazon

NVIDIA

Alphabet

Tesla

Berkshire Hathaway Inc. - Ordinary Shares - Class B

UnitedHealth Group

This broadly diversified portfolio is representative of the opportunity set in the large-blend category. It relies on the market’s collective wisdom to size its positions and enjoys low turnover as a result. It earns a High Process Pillar rating.

The S&P 500 selects stocks from the pool of the largest 500 U.S companies that pass its liquidity and profitability screens. The profitability screen requires that the sum of a company’s GAAP earnings over the past four quarters be positive as well as the most recent quarter. The screen imparts a slight quality tilt to the portfolio but has a limited impact on the portfolio’s composition relative to other large-cap-focused benchmarks since many large-cap stocks tend to be profitable. But there have been instances where profitability prevented otherwise qualified companies from index inclusion. For example, Tesla TSLA was added to the index only after it passed the profitability screen in December 2020, despite passing the liquidity and market-cap thresholds in January 2013. Once the index committee selects stocks, it weights them by market cap.

Market-cap weighting harnesses the market’s collective wisdom on stocks’ relative valuations and helps curb turnover and trading costs. The index committee further curbs turnover by implementing changes as it sees fit rather than adhering to a strict reconstitution schedule.

High

Process

BlackRock's industry-leading technology, global footprint, and extensive supporting cast earn an Above Average People Pillar rating. The team employs BlackRock's Aladdin platform to fulfill much of its portfolio management tasks, and global trading desks allow traders to conduct foreign transactions in a cost-effective way.  

The iShares team has endured had some turnover over the past few in recent years. But index-tracking performance should remain tight, thanks to heavily automated processes and several long-tenured managers that remain at the helm. Amy Whitelaw left the team in February 2023 for another role within the organization. Rachel Aguirre left the team in March 2021 after she was promoted to iShares head of product engineering. Paul Whitehead replaced Alan Mason as a manager in January 2022, when Mason left to focus on the firm's customized institutional indexing capabilities. IShares has yet to name a successor for Whitelaw, but they will join a seasoned group in Greg Savage and Jennifer Hsui, who will continue to oversee this fund and have helped manage iShares ETFs since the early 2000s.  

These managers interact with a wider team of traders and managers around the globe to execute the fund's day-to-day operations. The larger number of managers also limits the impact of personnel turnover when it does occur. A portion of their compensation is tethered to index-tracking performance, which aligns manager interests with those of the fund's investors.

Above Average

People

BlackRock offers compelling options across asset classes and vehicles. It earns an Above Average rating for Parent. 
The firm’s approximately USD 8 trillion in assets under management, as of Sept. 30, 2022, gives it unparalleled scale and influence. It is a market-leading index fund provider globally, and its iShares exchange-traded fund franchise offers a low-cost lineup of core funds that investors can use to build a well-diversified portfolio for dirt cheap. The firm can be more adventurous in its ETF launches than some peers, so not everything it launches is appropriate for the masses. As a result, it is likely to have more ETF closures than peers that stick to the basic building blocks.  
The firm’s active fixed-income and multi-asset efforts also stand out as some of the best in the industry. Those benefit from BlackRock’s commitment to building a first-class risk management system via its Aladdin analytics software. The software is also available for sale to other firms and has proved to be a popular option for competitors, a testament to its usefulness. 
More recently, the firm has shifted its focus to ESG offerings and incorporating ESG across its investment lineup, leading to a political backlash in the United States.
BlackRock isn’t the best at everything it tries to do, but retail investors, financial advisors, and large institutions could all build robust portfolios using BlackRock’s products.

Parent

iShares Core S&P 500 ETF

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