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Megacap tech gets new BlackRock ETF

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7 months ago

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Mag 7, Plus: widening the winners' circle

 BlackRock’s iShares is trying to appeal to investors who want to diversify beyond from the so-called Magnificent Seven.

The firm launched the iShares Top 20 U.S. Stocks ETF (TOPT) this month. It doesn’t just hold the Magnificent Seven — Apple, Amazon, Meta, Alphabet, Microsoft, Nvidia and Tesla. It’s made up of the 20 largest U.S. stocks by market capitalization.

“What the iShares build ETFs are designed to do is to deliver a tool kit of simple solutions for investors to be able to capture the growth of some of the largest companies within the U.S. equity market today, but to do so in a broader and more diversified manner,” BlackRock’s Rachel Aguirre told CNBC’s “ETF Edge” on Monday.

Aguirre, the firm’s head of U.S. iShares product, noted the ETF’s mission is to deliver an easy and accessible way to tap into the innovation of megacaps – “whether that be in the tech-heavy Nasdaq space or, more broadly, within the S&P [500].”

The ETF, according to Aguirre, provides a way for investors worried about the concentration of the Magnificent Seven stocks in the S&P 500.

On Thursday, the Magnificent Seven slid more than 3.5% as a group — losing around $615 billion in market cap. That’s equivalent to the size of JPMorgan Chase.

However, the Magnificent Seven is still up about 43% so far year while the S&P 500 is up around 20%

“It’s important for clients and investors to remember that there are split views on this topic. There are many investors who believe that the big will get bigger [and] that the winners will continue to win,” Aguirre said. “There’s also another side to this argument. There are many investors who believe that it’s actually a very worrisome time to continue investing in… mega-cap companies because of just their high valuations.”

The iShares Top 20 U.S. Stocks ETF is down 2% since its Oct. 23 launch.

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Swiss government proposes tough new capital rules in major blow to UBS

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2 days ago

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June 6, 2025

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A sign in German that reads “part of the UBS group” in Basel on May 5, 2025.

Fabrice Coffrini | AFP | Getty Images

The Swiss government on Friday proposed strict new capital rules that would require banking giant UBS to hold an additional $26 billion in core capital, following its 2023 takeover of stricken rival Credit Suisse.

The measures would also mean that UBS will need to fully capitalize its foreign units and carry out fewer share buybacks.

“The rise in the going-concern requirement needs to be met with up to USD 26 billion of CET1 capital, to allow the AT1 bond holdings to be reduced by around USD 8 billion,” the government said in a Friday statement, referring to UBS’ holding of Additional Tier 1 (AT1) bonds.

The Swiss National Bank said it supported the measures from the government as they will “significantly strengthen” UBS’ resilience.

“As well as reducing the likelihood of a large systemically important bank such as UBS getting into financial distress, this measure also increases a bank’s room for manoeuvre to stabilise itself in a crisis through its own efforts. This makes it less likely that UBS has to be bailed out by the government in the event of a crisis,” SNB said in a Friday statement.

‘Too big to fail’

UBS has been battling the specter of tighter capital rules since acquiring the country’s second-largest bank at a cut-price following years of strategic errors, mismanagement and scandals at Credit Suisse.

The shock demise of the banking giant also brought Swiss financial regulator FINMA under fire for its perceived scarce supervision of the bank and the ultimate timing of its intervention.

Swiss regulators argue that UBS must have stronger capital requirements to safeguard the national economy and financial system, given the bank’s balance topped $1.7 trillion in 2023, roughly double the projected Swiss economic output of last year. UBS insists it is not “too big to fail” and that the additional capital requirements — set to drain its cash liquidity — will impact the bank’s competitiveness.

At the heart of the standoff are pressing concerns over UBS’ ability to buffer any prospective losses at its foreign units, where it has, until now, had the duty to back 60% of capital with capital at the parent bank.

Higher capital requirements can whittle down a bank’s balance sheet and credit supply by bolstering a lender’s funding costs and choking off their willingness to lend — as well as waning their appetite for risk. For shareholders, of note will be the potential impact on discretionary funds available for distribution, including dividends, share buybacks and bonus payments.

“While winding down Credit Suisse’s legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands,” Johann Scholtz, senior equity analyst at Morningstar, said in a note preceding the FINMA announcement. 

“Such measures may place UBS’s capital requirements well above those faced by rivals in the United States, putting pressure on returns and reducing prospects for narrowing its long-term valuation gap. Even its long-standing premium rating relative to the European banking sector has recently evaporated.”

The prospect of stringent Swiss capital rules and UBS’ extensive U.S. presence through its core global wealth management division comes as White House trade tariffs already weigh on the bank’s fortunes. In a dramatic twist, the bank lost its crown as continental Europe’s most valuable lender by market capitalization to Spanish giant Santander in mid-April.

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