iShares Morningstar Growth ETF

ILCG

Market cap $3.05B

iShares Morningstar Growth ETF is a passively managed vehicle with a growth factor-centered strategy. NVDA-heavy ILCG is a decent competitor to SCHG owing to its ultra-low expense ratio of 0.04%, strong liquidity, and robust factor exposures. However, from April 2021 to September 2025, ILCG has underperformed SCHG and QQQ, capturing 116% of IVV's downside, which is a disappointing result.

ILCG offers cheap, efficient exposure to large-cap growth stocks, but current market greed and high valuations make growth bias risky now. The ETF is highly concentrated in tech, especially Nvidia and Microsoft, amplifying risk during market downturns and periods of volatility. Economic indicators suggest slower GDP growth, a cooling labor market, and persistent inflation, challenging the outlook for growth stocks.

It's probably safe to say that most investors aren't buying exchange traded funds (ETFs) for the growth potential they can provide.

The iShares Morningstar Growth ETF (ILCG) targets large and mid-cap U.S. growth stocks, with a strong bias toward technology and consumer sectors, led by Microsoft and NVIDIA. ILCG trades at a premium valuation, driven by high-growth, high-multiple stocks, but shows mixed profitability, trailing the Russell 1000 in EBITDA margin and ROE. While ILCG offers diversified growth exposure, its elevated volatility and lagging performance against top growth funds suggest a cautious approach for long-term outperformance.

ILCG owns a portfolio of mid-cap and large-cap growth stocks. The fund has the potential to continue to outperform the broader markets. However, it may underperform other growth funds due to its higher exposure to mid-cap stocks.

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iShares Morningstar Growth ETF has outperformed the broader market in recent years due to growth stock bias. Economic uncertainties and high leverage levels create a mixed environment for stocks in the short term. ILCG's high valuation multiples and volatility may make it less attractive compared to peer group growth ETFs.

iShares Morningstar Growth ETF holds over 300 stocks with historical and forecasted growth characteristics. Like many growth funds, the ILCG ETF is overweight in technology and in a few mega-cap companies. ILCG has outperformed the S&P 500 since its inception in 2004 and shows attractive quality metrics.

ILCG which focuses on large-cap-and-mid-cap stocks with growth characteristics has outperformed the benchmark by 700bps over the past year. Notwithstanding the recent performance, we don't feel ILCG is as competent a growth ETF as VUG, the largest offering in this space. The relative strength and standalone charts suggest that this is an overbought theme, and valuations are not cheap either.

ILCG is poised to disappoint in the current high interest rate environment, driven in part by its overweight to expensive high growth Tech stocks, and a potential resurgence of Value. Active managers are better equipped to navigate the current environment relative to passive funds like ILCG. Growth-oriented investors should consider QQQ as an alternative, which has consistently outperformed ILCG with similar exposure and volatility.