Key Morningstar Metrics for iShares S&P US Mid-Cap Index ETF XMC
- : US Small/Mid Cap EquityMorningstar Category
- : GoldMorningstar Medalist Rating
- : ★★★★Morningstar Rating
- MER: 0.16%
iShares Core S&P Mid-Cap offers inexpensive and diversified exposure to US mid-cap stocks, carving a durable advantage in this efficient market segment.
The fund replicates the S&P MidCap 400 Index, which selects 400 stocks that land between the 85th and 95th percentiles of the US stock market by market capitalization. This is further down the market cap ladder than most mid-cap funds. The index weights stocks by market cap, and an index committee has discretion over choosing stocks that meet certain liquidity, size, and profitability thresholds. The index rebalances quarterly, but the committee determines its reconstitution schedule. This provides some flexibility to avoid unnecessary changes and reduce turnover.
The bedrock of this strategy is market-cap weighting, which harnesses the market’s collective wisdom on the relative value of each holding. It’s also an efficient approach, keeping turnover and associated trading costs down. Mid-cap stocks reflect new information quickly, since most are frequently traded. On average, passive funds in this category have outperformed their active peers over the long run.
Sector allocations are a reasonable approximation of the opportunity set. Sector weightings tend to deviate by no more than 6 percentage points from the Morningstar US Mid Cap Index, which represents the mid-cap stock market. The portfolio is well-diversified. A lower concentration means the portfolio is less affected by individual stock movements, which can keep volatility in check.
The portfolio tilts toward small-cap stocks relative to the Morningstar US Mid Cap Index. Different index families define mid-cap stocks differently, leading to a wide range of portfolios across index funds. Investors should consider these differences when building a portfolio. Staying within the same index family can reduce gaps or overlap between market segments.
The S&P MidCap 400 Index returned 11.7% annualized over the past 10 years through June 2026. The fund typically holds little cash, which should help it outperform cash-saddled active peers during market rallies. Likewise, low cash drag could hurt this fund when the stock market declines. Performance across share classes will vary on account of differences in fees and currency exchange rates for non-US investors.
iShares S&P US Mid-Cap Index ETF: Performance Highlights
The funds following this strategy vary in fees, influencing relative returns. However, fees across the board tend to be low, allowing them to capture nearly all the S&P 400’s performance. Currency performance across regions can also drive relative returns. Additionally, most share classes engage in securities lending, which allows them to earn back a portion of their fees, slightly improving investor returns.
The strategy’s performance closely follows the ups and downs of the US mid-cap stock market, since it is always fully invested. All else equal, this strategy should outperform peers that hold cash during market rallies, which holds back their returns. No cash buffer also means that the strategy may lag similar peers when the market falls.
The strategy’s bias toward small-cap stocks should further add to its volatility, since those companies are prone to greater price swings. However, its profitability screen mitigates that risk by steering the fund away from erratic low-quality firms, which can help the fund weather drawdowns.
