The Blackrock iShares Core S&P ASX200 (ASX:IOZ) is an Exchange Traded Fund that gives investors exposure to the the top 200 Australian Shares by market capital and liquidity, according to the Standards and Poors ASX200 index (ASX:XJO), for a Management fee (MER) of 9 basis points (0.09%). At the time of writing, the IOZ ETF holds nearly (AUD) $2.3 Billion in underlying holdings, which is concentrated in the areas of Financials, Resources (materials) and Healthcare. It currently has a P/E ratio of about 18 and a P/B ratio of 1.9.
This article will provide an overview of the Blackrock iShares Core S&P ASX200 Australian Shares Exchange Traded fund (ASX:IOZ), exploring its structure, management, holdings, past performance and fee structure to explore whether I will personally add it to my ‘FI Portfolio’.
“The fund aims to provide investors with the performance of the S&P/ASX 200 Accumulation Index, before fees and expenses. The index is designed to measure the performance of the 200 largest Australian securities listed on the ASX.”
Blackrock IOZ Investment Objective
IOZ tracks the S&P ASX200 index, which deviates from the ‘All ordinaries’ which tracks the top 500 companies; in this way, the Blackrock IOZ fund is concentrated more on just Australia’s biggest ‘Blue chip’ stocks, by market capitalization (as well as with liquidity requirements).
Benefits of holding IOZ according to Blackrock are;
1. Low cost access to the 200 largest companies on the ASX in a single fund
2. Exposure to the leading index of broad Australian equities
3. Use at the core of your portfolio for your essential domestic allocation
Blackrock iShares IOZ Investment statements
The Blackrock iShares core S&P ASX200 Australian shares ETF is weighted in line with the index, which gives it a sector weighting that is fairly high in financials, Materials (Resources i.e. mining) and Healthcare. The sectors of the top 93% or so of the fund are detailed below;
As of September 2020, Blackrock iShares Core S&P ASX200 ETF (ASX:IOZ) has the current top holdings;
| Code | Company name | Sector | Weight (%) |
| CSL | CSL LTD | Health Care | 7.93 |
| CBA | COMMONWEALTH BANK OF AUSTRALIA | Financials | 7.04 |
| BHP | BHP GROUP LTD | Materials | 6.72 |
| WBC | WESTPAC BANKING CORPORATION CORP | Financials | 3.71 |
| NAB | NATIONAL AUSTRALIA BANK LTD | Financials | 3.38 |
| WES | WESFARMERS LTD | Consumer Discretionary | 3.10 |
| ANZ | AUSTRALIA AND NEW ZEALAND BANKING | Financials | 3.00 |
| WOW | WOOLWORTHS GROUP LTD | Consumer Staples | 2.82 |
| MQG | MACQUARIE GROUP LTD DEF | Financials | 2.41 |
| TCL | TRANSURBAN GROUP STAPLED UNITS | Industrials | 2.39 |
IOZ has performed generally as expected for a broad market index tracking ETF, giving shareholders exposure to the broader Australian market and providing partially franked dividends (about two thirds) as well as reasonable capital growth. Here I break this down into Dividend, Capital growth and total return.
IOZ pays quarterly dividends which some investors will love, and as of 31 August 2020, IOZ has had a 12 month trailing dividend yield of 3.36% which is about two-third franked. This gives it a grossed up dividend yield of approximately 4.3%. To calculate this, you simply add the unfranked and grossed up franked components;
Grossed up yield =(3.36 * .37) + (3.36*.63/.7) = 1.2432 + 3.024 = 4.2672 ~ 4.3%
IOZ was constructed in December 2010, and has performed closely to the index it tracks. As of September 2020, it had returned about an annualized 1.74% capital growth since inception which is in line with the pure S&P ASX200 index (ASX:XJO).
The COVID-19 market ‘crash’ can be seen on the graph which has of course lowered the total return (over the short period of the funds 10 year existence), and over the very long term I would expect a performance in line with the index it tracks which is a bit higher. In general over the long term (20-40 years), according to the Australian securities Exchange, the Australian Market has returned investors with a capital growth of between 4 to 8% (as well as an extra 4% in dividends).
To get the total shareholder return, we simply add together the grossed up dividend yield (grossed up for franking credits) to the capital growth to get the cumulative total shareholder return. Since inception, IOZ has returned shareholders a fairly safe 6.94% total return.
It is interesting to note when this is allocated into calendar years, how 2019 had such a strong bull run which of course led into the COVID-19 crash of 2020.
Comparing IOZ (S&P ASX 200) to the Aussie ‘All Ords’ (S&P ASX 500) we can see that over the past ten years the all ords have outperformed the Blackrock iShares fund slightly; ending up around 6% or so higher over ten years – although this only represents an annualized capital growth out-performance of about .68% (which goes to show how slight percentages add up and compound over time, and why you need to minimize fees for long term success). 10 years isnt a very long time when considering investments, and its worth noting that past performance is not indivcitive of future performance at all!
Of course, it might be considered a little unfair to compare different indexes, and this is purely for a comparison. IOZ tracks the S&P ASX200 index (ASX:XJO) which is just the larger companies.
IOZ tracks and is re-balanced quarterly in line with the S&P ASX200 index.
The S&P/ASX 200 is recognized as the institutional investable benchmark in Australia. Index constituents are drawn from eligible companies listed on the Australian Securities Exchange. The S&P/ASX 200 is designed to measure the performance of the 200 largest index-eligible stocks listed on the ASX by float-adjusted market capitalization.
Standards and Poors
The ongoing management fee (Management Expense Ratio or MER)of IOZ is 0.09% or 9 basis points, putting it in the middle between the more expensive Vanguard Australian ASX300 shares fund (ASX:VAS) of 10 basis points, and the Betashares ASX200 shares fund (ASX:A200) of 7 basis points.
This means based on management fees alone, IOZ seems to be a sensible choice with a fairly reasonable MER. Whether you think its worth paying the additional basis points or not is worth it is up to you, although its worth noting that all three do track slightly different indexes – the S&P ASX200, the S&P ASX300 and the Solactive ASX200 index.
Conclusion
In this article we looked at an overview of the Blackrock iShares Core S&P ASX200 Australian Shares Exchange Traded fund (ASX:IOZ). I explored its structure, management and fee structure, holdings and past performance to explore whether I will personally add it to my ‘FI Portfolio’ – and for now I will be sticking to A200 (and if I was starting again, I would pick A200).
The Blackrock iShares Core S&P ASX200 (ASX:IOZ) is an Exchange Traded Fund that gives investors exposure to the the top 200 Australian Shares by market capital and liquidity, according to the Standards and Poors ASX200 index (ASX:XJO), for a Management fee (MER) of 9 basis points (0.09%). At the time of writing, the IOZ ETF holds nearly (AUD) $2.3 Billion in underlying holdings, which is concentrated in the areas of Financials, Resources (materials) and Healthcare. It currently has a P/E ratio of about 18 and a P/B ratio of 1.9.
Captain FI is a Retired Pilot who lives in Adelaide, South Australia. He is passionate about Financial Independence and writes about Personal Finance and his journey to reach FI at 29, allowing him to retire at 30.
