Fund Profile: iShares Core Allocation ETFs

These Canadian ETFs may be vanilla, but they’re very cheap.

Michael Dobson 27 October, 2023 | 8:55AM
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Plant growing in coins

The second-largest balanced ETF series in Canada is also one of the oldest. The iShares Core Allocation ETFs first started as actively managed strategies by Claymore Investments before a redesign in 2018 ultimately led to their current form today. This simplified the strategies and expanded the series from two to five – Conservative Balanced XCNS, Income Balanced XINC, Balanced XBAL, Growth XGRO, and Equity XEQT – which target equity weights of 20%, 40%, 60%, 80%, and 100% respectively. The current set-up relies on static allocation and cheap underlying index-tracking ETFs to create a cost advantage over peers.

The eight underlying holdings are some of BlackRock’s best. All eight have Morningstar Medalist Ratings of Bronze or better as of this writing with two holdings iShares Core MSCI EAFE IMI ETF XEC and iShares Core S&P Total US Stock Market ETF ITOT receiving Gold Medalist ratings. The eight charge between 3 to 27 basis points which allows the aggregate portfolio to remain low-cost. At 20 basis points, the Core Allocation ETFs are some of the cheapest balanced funds in Canada. Index groups at BlackRock handle rebalancing and cashflow management which keeps the Core Allocation ETFs efficient.

Lack of Investment-Led Impact Limits Potential

The Product group at BlackRock Canada serves as the main channel for portfolio enhancements and change; this team led the charge in redesigning the Core Allocation ETFs in 2018. However, without much visible input from the Model Portfolio Team or other investment groups at BlackRock, these changes are driven more by looking at peers and retail investor preferences than unique insights.

This approach can be seen in the set-up of the equity sleeve and fixed income sleeve of the funds respectively. The former is nearly identical to the Morningstar Category benchmarks along region, market cap, sectors, and style lines. The latter leans more into Canadian fixed income than the average Global Balanced peer; 76% of the fixed income sleeve resides in Canada versus 54% for the average global balanced fund.

The iShares Core Allocation ETFs are designed to be ordinary, but still stand out due to their low cost.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
iShares Core Balanced ETF Portfolio28.58 CAD0.28Rating
iShares Core Conservative Balanced ETF22.61 CAD0.27Rating
iShares Core Growth ETF Portfolio28.24 CAD0.21Rating
iShares Core Income Balanced ETF19.93 CAD0.20Rating

About Author

Michael Dobson  Michael Dobson is an Associate Manager Research Analyst at Morningstar Canada

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