XOEX: A Low-Cost Core U.S. Equity ETF for Active Stock Pickers

Mega-Cap and Tech Sector Dominance

It helps to start with the benchmarks. The S&P 500 is a market-cap-weighted index of 500 U.S. companies selected using a combination of rules and committee discretion. Constituents are screened for size, liquidity, and earnings consistency, with some subjectivity around additions and removals.

The S&P 100 follows the same philosophy but in a far more concentrated form. It holds roughly one-fifth the number of stocks, focused on the largest segment of the U.S. equity market, and it is also market-cap weighted. As a result, there is substantial overlap between the two indexes.

Source: IVV & OEF holdings as of January 22, 2026

Sector exposure compounds this effect. Information Technology represents 36.16% of the S&P 500 ETF and 42.65% of the S&P 100 ETF.

Source: ETF Central, 2026

In practice, this means portfolio risk and returns are driven by a small group of mega-cap stocks, most of which sit in the same sector.

For stock pickers, that can be counterproductive. A traditional cap-weighted core allocation may load the portfolio with exposure to the same large technology names an investor already owns, or is deliberately trying to avoid, even before any active positions are added.

How XOEX Addresses Concentration Risk

Rather than reweighting an index using equal weighting or fundamental metrics, a simpler approach is to identify the stocks that dominate a benchmark and systematically exclude them. That is the approach used by the Xtrackers S&P 100 Ex Top 20 ETF

XOEX starts with the S&P 100 and removes the 20 largest stocks by market capitalization at each reconstitution. The process is rules-based and does not rely on forecasts or factor tilts. The ETF charges a 0.15% expense ratio, which is lower than the 0.20% charged by a comparable market-cap-weighted S&P 100 ETF from iShares.

The result is meaningfully lower concentration. As of January 22, the top 20 holdings in XOEX account for 43.63% of the portfolio. As noted earlier, in a standard market-cap-weighted S&P 100 ETF, the top 20 represent 66.18%. That is a reduction of 22.55% in top-end concentration.

Source: XOEX holdings as of January 22, 2026

Sector exposure also shifts. Information technology represents 27.67% of XOEX, compared with 42.65% in the traditional S&P 100 ETF. By removing the largest mega-cap stocks, many of which sit in the same sector, XOEX reduces both single-stock and sector dominance without abandoning a familiar benchmark.

Source: ETF Central, 2026

For investors who actively pick stocks, particularly in the mega-cap space, XOEX could serve as a core allocation that helps limit overlap with high-conviction positions, while still maintaining beta exposure.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.