BNY Mellon's BKLC ETF and Its 40% Surge: A Zero-Fee Tech-Heavy Alternative to SPY and VOO

The BNY Mellon Large Cap ETF (BKLC) has emerged as a compelling contender in the crowded large-cap U.S. equity market, surged 40% in recent months and challenging the dominance of established benchmarks like the SPDR S&P 500 ETF Trust (SPY) and the Vanguard S&P 500 ETF (VOO). At the heart of this rise is a compelling value proposition: a zero expense ratio, outperformance in recent years, and a strategic tilt toward high-growth technology stocks. Yet, as with any concentrated portfolio, BKLC's success raises critical questions about the trade-offs between cost efficiency and concentration risk in indexing.

Cost Efficiency: A Zero-Fee Edge

BKLC's 0% expense ratio starkly contrasts with SPY's 0.09% and VOO's 0.03%, offering a significant cost advantage for investors. This aligns with a broader industry trend toward fee compression, where investors increasingly prioritize minimizing drag from management fees. According to data from BNY Mellon, BKLC's cost structure has contributed to its outperformance: it returned 15.5% over the past year compared to SPY's 14.3% and 18.5% year-to-date through December 29, 2025, versus SPY's 17.2%. For long-term investors, these savings compound meaningfully, particularly in a low-yield environment.

Performance and Sector Allocation: The Tech Tilt

BKLC's outperformance is driven by its heavy exposure to technology stocks. Electronic technology accounts for 24.46% of its portfolio, while technology services represent 21.62%. This concentration has amplified returns in sectors like artificial intelligence and large-cap tech, where companies such as NVIDIA, Apple, and Microsoft have surged. However, the top three holdings alone make up nearly 20% of the fund, creating a level of concentration that diverges from the broader diversification of SPY and VOO.

This tech tilt mirrors a broader market phenomenon: the "Magnificent 7" now dominate over a third of the S&P 500's market capitalization. While this has fueled gains for BKLC, it also exposes the fund to sector-specific risks. A downturn in tech-whether due to regulatory scrutiny, slowing AI adoption, or a shift in macroeconomic conditions-could disproportionately impact BKLC compared to its more diversified peers.

Historical Volatility and Risk-Adjusted Returns

BKLC's performance during past market stress events offers mixed insights. During the 2020 market crash, BKLC's maximum drawdown of -26.14% was less severe than VOO's -33.99%. However, its daily volatility of 19.14% was slightly higher than VOO's 18.75%, suggesting greater short-term price swings. Sharpe ratios, a measure of risk-adjusted returns, were nearly identical: 1.18 for BKLC and 1.16 for VOO according to analysis. This indicates that while BKLC's returns have been competitive, its volatility profile may not offer a clear edge in risk management.

The fund's concentration in tech also amplifies its sensitivity to sector-specific downturns. For instance, a hypothetical correction in AI-driven stocks could erode BKLC's gains more sharply than SPY or VOO, which spread risk across a broader range of industries. This dynamic underscores the tension between cost efficiency and diversification-a core consideration for investors weighing BKLC against its peers.

The Trade-Off: Cost Savings vs. Liquidity and Track Record

BKLC's advantages come with caveats. Its asset under management (AUM) of $5 billion pales in comparison to SPY's $716 billion and VOO's $250 billion, raising questions about liquidity and market resilience. Larger ETFs like SPY benefit from deeper trading volumes and broader institutional support, which can stabilize performance during periods of market stress. Additionally, BKLC's shorter track record-launched in 2023-means investors have less historical data to assess its behavior in diverse market cycles.

Conclusion: A Strategic Choice for Tech-Centric Investors

BKLC represents a bold reimagining of large-cap indexing, combining zero fees with a high-conviction tech strategy. For investors prioritizing cost efficiency and comfortable with sector concentration, it offers an attractive alternative to SPY and VOO. However, its performance is inextricably tied to the health of the technology sector, a double-edged sword in an increasingly concentrated market. As the Magnificent 7 continue to shape the S&P 500, BKLC's success will hinge on whether its tech tilt proves resilient or becomes a vulnerability in a diversified downturn.

For now, the fund's 40% surge reflects its appeal in a bull market for growth stocks. But as the saying goes, past performance is no guarantee of future results-and in the case of BKLC, the future will depend as much on the tech sector's trajectory as on its cost advantages.