iShares Russell 1000 Growth Index (ETF) (IWF)

iShares Russell 1000 Growth Index Fund seeks to gain exposure to large, growth oriented U.S. equities that have higher price to book ratios with higher forecasted growth. The price to book ratio of the fund is about 5.28 with a price to earnings ratio of 24.92 as of 31st December 2006.


Technology sector constitute about one fifth of the total corpus, which is currently troubled by pricing pressure and seasonal factors affecting IT spending in 2007. Microsoft adds weight to the fund with the launch of vista whose results looks mixed and would take time for migration to the same. However data and internet security, data storage and back up remain a bright spot to fuel growth in the sector. A second look into the individual components of the financial services shows that it has more of asset management, investment banking and brokerage houses and less exposure to the traditional banking sector affected by the inverted yield curve. But off late with the major indexes tanking in the past week few weeks and expectations of a global melt down make it a cause of concern.


Consumer discretionary is dominated by the retail gaits like Wal-Mart, Home Depot that are experiencing stabilizing margins with inventory remaining under control. Entertainment and media is seeking to capitalize on a nascent digital market facing challenges in the form of saturation and piracy but still has lots to cash on. Though the prospects for energy sector look good, lack of weightage may not help it make a big impact on the whole. Outlook for health sector looks positive sector with rising medical cost and 7% exposure to consumer staple adds more stability.


Average annualized return for the past five years at 2.5% is not satisfactory trailing majority of its competitors. Moreover it peers have used more complex style methods and several other variable to identify growth stocks when compared to Russell’s two factor selection model. Though the management instills confidence, the high expense ratio and volatility make its going more tough in the coming year.