IWF Tracks the Russell 1000 Growth Index, But Three Names Now Drive a Third of Its Performance

IWF tracks the Russell 1000 Growth Index, which contains 391 stocks. The fund’s assets are heavily concentrated, with the top ten holdings representing 58.73% of the portfolio and the top three accounting for 32.83%. NVIDIA, Apple, and Microsoft together drive a large share of fund movement. IWF charges 0.18% annually, while a comparable growth fund, VUG, charges about 0.04%. Over five years, both funds returned about 100%, suggesting the extra concentration did not add meaningful benefit. Over one year, VUG slightly outperformed IWF, with Microsoft dragging IWF’s results. Underlying fundamentals support the large weights, including strong revenue growth for NVIDIA and rapid AI-related growth for Microsoft.

"IWF charges 0.18% in annual fees on roughly $113 billion in assets. The top ten holdings represent 58.73% of the fund. The top three alone account for 32.83%, split into NVIDIA at 12.76%, Apple at 11.18%, and Microsoft at 8.89%. Cap-weighted indexing produced this on purpose. NVIDIA (NASDAQ:NVDA) carries a market cap of $5.39 trillion, Apple (NASDAQ:AAPL) sits at $4.44 trillion, and Microsoft (NASDAQ:MSFT) at $3.12 trillion."

"When three companies get this large, a cap-weighted index has no real defense against concentration. The label says diversified growth. The math says levered mega-cap AI trade. What you actually own is a fund where roughly a third of every dollar now moves with three stocks, which means the fund's results get decided by NVIDIA, Apple, and Microsoft before the other 388 holdings have any say."

"Over the past five years, IWF returned 100%. The Vanguard Growth ETF (NYSEARCA:VUG), which holds a similar but broader basket of growth names, returned roughly 100% over the same window. So the extra top-heaviness in IWF bought you essentially nothing across five years, and you paid 0.18% against VUG's 0.04% for the privilege of slightly more crowded weights."

"The one-year picture actually tilts the other way. VUG returned 25% against IWF's 23%, partly because Microsoft has dragged. Microsoft is down 13% year to date and 8.5% over the past year, even as the rest of the AI cohort kept moving. NVIDIA carried the freight, up 1,413% over five years and 63% over the past one. The underlying fundamentals justify the weighting on paper - NVIDIA's most recent quarter delivered $81.6 billion in revenue, up 85.2%."

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