The Roundhill Magnificent Seven ETF (CBOE:MAGS) was designed to provide investors with clean, equal-weighted exposure to the seven mega-caps that drove the S&P 500 higher for most of the past three years. Since its April 11, 2023 launch, MAGS has done exactly that, returning 190.29% through August 7, 2026.
Holders bought it for that exposure, and it delivered. 2026 has been a different story. MAGS is up 4.82% year-to-date, trailing the S&P 500 and getting outrun by a fund built to be its opposite: the Defiance Large Cap ex-Mag 7 ETF (NASDAQ:XMAG).
Why the Concentrated Bet Is Slipping
The performance gap this year is wide. XMAG has returned 15.95% YTD, while the SPDR S&P 500 ETF has returned 13.39%. MAGS trails both. The reason sits inside the fund’s own holdings. Tesla, one of the seven equal-weighted names, is down 26.94% YTD. Microsoft is up just 3.85%. When a basket owns each name at roughly the same weight, a single laggard the size of Tesla drags on the whole vehicle.
Structurally, MAGS is unusual for a fund that most investors assume is a straight equity basket. The March 31, 2026 NPORT filing shows the seven Mag 7 equity positions accounting for only 34.11% of net assets. Treasury bills sit at 52.67%, a Roundhill ultra-short-duration ETF holds another 8.97%, and net derivative positions total roughly $113.2 million.
The exposure is delivered through cash-collateralized swaps, which means the fund’s returns depend on both the underlying stocks and the pricing of those swap contracts.
What XMAG Actually Owns
The BITA US 500 ex-Magnificent 7 Index is what XMAG tracks, with an expense ratio of 0.35% and roughly $175.40 million in assets. The fund owns the remaining S&P 500 index shares outright. As of May 31, 2026, the top position is Broadcom at 4.78%, followed by Micron at 2.51%, Eli Lilly at 2.16%, AMD at 1.93%, and JPMorgan Chase at 1.85%.
The fund keeps semiconductor and AI-infrastructure exposure through the names that supply the Mag 7, while adding financials, healthcare, and energy weights that a Mag-7-only basket lacks.
Over the past year, XMAG has returned 24.37% versus 18.99% for MAGS. A holder of MAGS is making a single-factor bet on seven names. A holder of XMAG owns roughly 500 large-caps, excluding the seven most-owned stocks in the world, capturing the parts of the index that have led in 2026 without paying for those that have not.
Tradeoffs Worth Naming
Tradeoffs come with XMAG as well. If the Mag 7 resume their leadership role, XMAG will lag by design. The fund is also smaller, with roughly $143 million in net assets per its May 31, 2026 NPORT filing, compared with MAGS at $3.5 billion. That size difference can matter for bid-ask spreads on larger orders. For investors who already own a broad S&P 500 fund alongside MAGS, adding XMAG serves to partially offset the concentrated bet rather than compounding it further.
How to Think About the Swap
The clean version of this trade is a full swap within a tax-advantaged account, where selling MAGS carries no capital gains consequences. In a taxable account, the calculation depends on the embedded gain. A holder who bought MAGS near inception is sitting on a large gain given the 190.29% return since April 2023, and a full sale could trigger a meaningful tax bill. A partial trim, redirecting new contributions to XMAG, or using tax-loss lots first are ways to shift the exposure without a one-day tax event.
What This Leaves an Investor to Decide
What it advertised is exactly what MAGS has done. The relevant question now is whether continuing to concentrate on those seven names still aligns with the goal that originally drew the investor in. So far in 2026, the broader half of the S&P 500 has been doing most of the work. XMAG is the vehicle that isolates that particular trade. Whether to reallocate depends on how much of the portfolio already sits in the Mag 7 through other index funds, and how much conviction remains in the original thesis.
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