The largest equal-weighted ETF is outperforming the S&P 500 this year thanks to the leadership of small-cap stocks in the rally.

The $3.1 billion Rydex S&P 500 Equal Weight ETF (NYSEArca: RSP) is up 10.7% year to date, compared with a 9.5% gain for the S&P 500, according to Morningstar.

Most stock indices weight individual stocks by the market cap, while RSP allocates an equal amount to every company in the benchmark. [ETF Chart of the Day: Equal-Weighted Funds]

For example, Apple (NasdaqGM: AAPL) represents 4% of SPDR S&P 500 (NYSEArca: SPY), which tracks the market-cap weighted index. Apple is the largest stock in the portfolio.

However, RSP rebalances quarterly to maintain the 0.2% weighting to all 500 stocks. The ETF has an expense ratio of 40 basis points, or 0.40%.

The equal-weight strategy results in a tilt to smaller companies and also value stocks, says Morningstar analyst Samuel Lee.