If you’re looking to invest in the Canadian Technology sector, the BlackRock iShares XIT ETF could be the right solution for you.
It is a popular ETF for passive investing in Canadian tech stocks.
With this XIT ETF review, let’s take a closer look to see if it’s the right solution for you.
Canadian Tech ETF
The BlackRock iShares S&P/TSX Capped Information Technology Index ETF could be an ideal way for you to passively invest in the Canadian tech sector.
- It is a low-cost way to passively invest in Canadian tech companies.
- Stellar performance in the last few years.
- It can be used to express a sector view.
- Canadian tech companies are overall weaker than American ones
BlackRock iShares XIT ETF is a low-cost index fund offered by BlackRock since March 19, 2001. It is one of the older funds offered by BlackRock that provides investors with exposure to a basket of Canadian Information Technology stocks.
The ETF seeks to provide investors with long-term capital growth by replicating the performance of the S&P/TSX Capped Information Technology Index as closely as possible, net of expenses.
The underlying ETF focuses primarily on various Canadian companies in the Information Technology sector.
The ETF is actively managed by BlackRock Asset Management, providing investors with the peace of mind that a reputable institution is managing the portfolio of stocks.
XIT.TO is currently trading at close to $53.37.
XIT Key Facts
As of October 9, 2023:
- Ticker Symbol: XIT.TO
- Exchange: Toronto Stock Exchange
- Assets Under Management: $583 Million
- MER: 0.60%
- 12-Month Trailing Yield: 0.00%
- Currency Traded: CAD
- Eligible Accounts: Most registered (TFSA, RRSP, etc) and non-registered available
Who Should Invest in XIT?
For potential investors of iShares XIT, a key question is: how should it fit into one’s broader investment strategy?
- Sector Specificity: If an investor believes strongly in the Canadian tech narrative, then having a dedicated allocation to iShares XIT can make sense. This ETF allows for targeted exposure to this niche sector.
- Diversification: For those with a global diversified portfolio, iShares XIT can be a way to increase weightage towards the Canadian tech sector specifically. It can complement broader tech ETFs that might have a US or global focus.
- Risk Tolerance: Given its concentrated nature, potential investors must be ready for higher volatility. The ETF might experience sharper swings compared to broader market ETFs, making it more suitable for those with a higher risk tolerance.
- Duration: The tech industry, especially in markets like Canada, is rapidly evolving. Investors should be prepared to review their position in this ETF more frequently than more stable, broad-market funds.
The iShares XIT Management Expense Ratio (MER) is not one of the lowest among ETFs you can find these days. With an MER of 0.61%, it can be quite a pricey ETF to consider.
However, its MER is still significantly lower than what you can expect from mutual fund products. The average mutual fund fee can be higher than 2%. It is one of the reasons you can see Canadians preferring ETFs over mutual funds in recent years.
iShares XGRO’s dividend yield as of October 9, 2023:
- 12-month trailing yield: 0.00%
- Distribution yield: 0.00%
- Dividend schedule: Semi-Annual
It is no surprise that the iShares XIT performance has been phenomenal over the last few years. The advent of high-growth tech companies like Shopify, Constellations Software, and Lightspeed POS, changed the landscape of the Canadian tech sector.
iShares XIT has been banking on the growth of the Canadian tech sector to provide investors with phenomenal returns in recent years. As of August, 2023:
The fund’s focus on one sector may make it a medium- to high-risk investment to consider, especially considering the fact that it does not hold equity securities or fixed-income assets trading on other stock exchanges.
It is betting entirely on the Canadian tech sector but has managed to provide prolific returns that are close to the benchmark index as well.
The hypothetical growth of $10,000 invested in the ETF for the last five years paints a clearer picture of how rapidly its performance has improved in the last two years, with the exception of a significant dip between mid-February and March 2022, and a decline since August 2023.
Go to the Blackrock website for real-time performance numbers of XIT.
Most ETFs diversify across various sectors, geographical locations, and between fixed-income and equity securities to align with respective investing goals. However, the BlackRock iShares S&P/TSX Capped Information Technology Index focuses primarily on the Information Technology sector.
The underlying index comprises Canadian equity securities that trade on the Toronto Stock Exchange.
All things considered, you can consider iShares XIT a bet on the Canadian IT sector across its various segments, including Application Software, Internet Services, and Infrastructure, IT Consulting, Systems Software, Communications Equipment, and more. Some of its holdings are in cash and its derivatives.
The total value of the ETF is $583 million as of October 09, 2023, highlighting a remarkable growth for investor capital in the last few years.
Asset allocation of XIT: 100% Equity, 0% Fixed Income
In this section of my iShares XIT review, I will discuss the fund’s asset allocation. Typically, ETFs provide investors with exposure to a mix of both fixed-income and equity securities. However, iShares XIT consists primarily of securities in the underlying S&P/TSX Capped Information Technology Index. The index focuses mainly on equity securities, with no fixed-income assets.
As of August 31, 2023:
| Ticker | Name | Sector | Market Value | Weight (%) | Notional Value |
|---|---|---|---|---|---|
| CSU | CONSTELLATION SOFTWARE INC | Information Technology | CAD 157,932,517.80 | 27.28 | 157,932,517.80 |
| SHOP | SHOPIFY SUBORDINATE VOTING INC CLA | Information Technology | CAD 127,173,127.06 | 21.96 | 127,173,127.06 |
| GIB.A | CGI INC | Information Technology | CAD 117,156,425.40 | 20.23 | 117,156,425.40 |
| OTEX | OPEN TEXT CORP | Information Technology | CAD 54,041,499.74 | 9.33 | 54,041,499.74 |
| DSG | DESCARTES SYSTEMS GROUP INC | Information Technology | CAD 35,557,414.30 | 6.14 | 35,557,414.30 |
| KXS | KINAXIS INC | Information Technology | CAD 17,446,376.20 | 3.01 | 17,446,376.20 |
| CLS | CELESTICA INC | Information Technology | CAD 16,759,023.75 | 2.89 | 16,759,023.75 |
| BB | BLACKBERRY LTD | Information Technology | CAD 11,162,419.00 | 1.93 | 11,162,419.00 |
| LSPD | LIGHTSPEED COMMERCE INC | Information Technology | CAD 11,028,963.98 | 1.90 | 11,028,963.98 |
| ENGH | ENGHOUSE SYSTEMS LTD | Information Technology | CAD 5,530,957.12 | 0.96 | 5,530,957.12 |
The BlackRock iShares S&P/TSX Capped Information Technology Index ETF primarily invests in various segments of the Canadian tech sector. Its top ten holdings comprise 98% of its entire investment portfolio. The remaining 0.07% of the fund’s holdings are in cash and/or derivatives.
While iShares XIT keeps adjusting its holdings to reflect the S&P/TSX Capped Information Technology Index, it has had an acute focus on Canadian equities like Shopify, Constellation Software, and CGI Inc.
Shopify used to account for a more significant allocation of the ETF’s funds under management, but it has recently been rebalanced by management to diversify holdings within the top ten equity securities.
Typically, this is the section in my reviews where I discuss the sector weighting of an ETF, depending on how much it invests in across Financials, Industrials, and other sectors of the economy. I will provide a segment weighting in my iShares XIT review because the ETF invests in different sectors within the Canadian tech sector.
iShares XIT invests almost half of its entire funds in application software. The second-biggest allocation is towards the Internet Services and Infrastructure segment. It invests in IT Consulting and Other similar services and then focuses on the Systems Software segment.
It has less than 1% weighting towards each of the Communications Equipment, Electronics Manufacturing Services, and Electronic Equipment and Instruments. The remaining allocation is towards Cash and/or Derivatives.
BlackRock iShares S&P/TSX Capped Information Technology Index is a slightly tricky prospect to consider. iShares XIT has had a prolific performance in recent years due to the sudden boom of the Canadian tech sector, led by Shopify.
With phenomenal returns in the recent few years that are far greater than its growth since inception, iShares XIT could be an ideal way to hedge your bets on the Canadian tech sector.
However, its focus on one sector also makes it a riskier investment to consider than others. The ETF invests in some of the top tech companies, exclusively trading on the TSX. Currently, the tech sector is growing rapidly, providing better returns.
However, the all-time high valuations for the Canadian tech sector can also imply a risk. There are no fixed-income assets or diversification across different sectors to cushion the fall if the tech sector goes into decline.
If you are in search of an ETF that invests in a broader range of companies diversified across different sectors, I would recommend checking out my Vanguard VFV review.
It is one of the most popular ETFs among Canadians that tracks the S&P 500 Index, tracking the performance of the market-cap weighted index of 500 publicly-traded companies in America.
XIT Holdings
As of August 08, 2023:
| Stock | Percentage of Assets |
| SHOPIFY SUBORDINATE VOTING INC CLA | 26.92 |
| CONSTELLATION SOFTWARE INC | 24.42 |
| CGI INC | 19.31 |
| OPEN TEXT CORP | 9.67 |
| DESCARTES SYSTEMS GROUP INC | 5.64 |
| KINAXIS INC | 3.09 |
| BLACKBERRY LTD | 2.59 |
| CELESTICA INC | 2.11 |
| LIGHTSPEED COMMERCE INC | 1.97 |
| ENGHOUSE SYSTEMS LTD | 0.84 |
| Total of Portfolio | 96.56 |
The cheapest way to buy ETFs is from discount brokers. My top choices in Canada are:
- 105 commission-free ETFs to buy and sell
- Excellent customer service
- Top-notch market research tools
- Easy-to-use and stable platform
- Stock and ETF buys and sells have $0 trading fees
- Desktop and mobile trading
- Reputable fintech company
- Fractional shares available
- ETF buys have $0 trading fees
- Excellent market research tools
- Most types of registered accounts available
To learn more, check out my full breakdown of the best trading platforms in Canada.
The cheapest way to buy ETFs is from discount brokers. My top choices in Canada are:
- 105 commission-free ETFs to buy and sell
- Excellent customer service
- Top-notch market research tools
- Easy-to-use and stable platform
- Stock and ETF buys and sells have $0 trading fees
- Desktop and mobile trading
- Reputable fintech company
- Fractional shares available
- ETF buys have $0 trading fees
- Excellent market research tools
- Most types of registered accounts available
To learn more, check out my full breakdown of the best trading platforms in Canada.
Conclusion
iShares XIT is a relatively simple fund from BlackRock that does what its name suggests: It tracks the Canadian tech sector’s performance.
iShares XIT is an effective option for passive investors looking to bank on the growth of Canadian tech companies.
