Principal U.S. Mega-Cap ETF

Principal U.S. Mega-Cap ETF (USMC) is an actively managed fund that holds about two dozen of the largest U.S. companies. A computer model picks them from the S&P 500 and gives more weight to financially strong firms. It charges 0.12% a year, below the 0.23% average for similar funds, though Vanguard Mega Cap ETF (MGC) charges 0.07%. It is concentrated: 26 stocks, with 54% in the top 10 as of June 30, 2026.

• Over the year to Oct 27, 2026, USMC returned +11.3%, 4th of 9 among similar funds.
• Its 5-year annualized return was +13.9%.
• In the 2020 COVID crash it fell 30% and regained its old high 4.9 months after the low.
• Its worst full calendar year was 2022 (-17.2%); its best was 2023 (+31.5%).
• The deepest fall in its price history was 30% (Feb 19, 2020 to Mar 23, 2020), recovered by Aug 18, 2020.

As of Jun 30, 2026, the fund held 26 securities; the ten largest made up 54.26% of assets.

By sector

• Over the three months to Jun 30, 2026, investors added a net $158.3M (creations minus redemptions, per the N-PORT report).
• Monthly total returns reported for that quarter: +9.61%, +5.49%, -0.16%.

USMC does not track an index. Its manager, Principal Global Investors (PGI), uses its own quantitative model, which is a rules-based computer screen. The model picks from the S&P 500 companies with the largest market capitalizations (the total market value of a company's shares). At least 80% of net assets must be in U.S. mega-cap stocks. The fund counts a company as mega-cap if it falls within the size range of the S&P 500's 50 largest companies or is worth at least $250 billion. As of September 30, 2026, that range ran from about $163.4 billion to $5.5 trillion.

The model doesn't weight stocks by size alone. It gives more weight to companies PGI ranks higher on financial strength, including balance sheets, the ability to pay short- and long-term debts, cash flow, and pricing power (the ability to raise prices without losing demand). The fund mixes growth and value stocks. As of June 30, 2026, the largest holdings were Micron Technology (8.8%), NVIDIA (7.5%) and Apple (6.6%).

Holdings are rebalanced at least once a year, but PGI can change the model or the portfolio whenever it chooses. Portfolio turnover was 23.9%. The fund is non-diversified, so it can put more money in a single stock than a diversified fund can. That means one company's slump can move the share price more.

• USMC charges 0.12% a year, versus an average of 0.23% for the similar funds below (2nd of 9, cheapest first).
• Using the prospectus's standard example, $10,000 invested would cost about $12 in the first year and $154 over 10 years (assuming a 5% annual return).

It holds the largest U.S. companies at low cost and has moved broadly with the market (one-year beta of 0.92), though its 26 stocks leave out mid-size and smaller companies.

USMC could fill the large-company stock part of a portfolio, but it has fallen sharply in downturns. It launched in October 2017, so it has no record from 2008. It dropped 30% in the 2020 COVID crash and recovered in about five months. In the 2022 bear market it fell 24.1% and took about nine months to regain its peak, in July 2023. Its worst calendar year was 2022, at -17.03%. Someone drawing income in a year like that might have to cash out shares at low prices. Income is small: the trailing yield was 0.73% as of October 27, 2026, paid quarterly. On costs, the SEC's standard example puts them at $12 in the first year and $154 over 10 years on $10,000. Past results don't predict the future, and a plan should look at the whole portfolio, not one fund.

Matched by holdings overlap from the latest N-PORT reports.