It has been some time since we last covered the Retailers in terms of the ETFs that reign in the space, but given recent inflow activity in the largest ETF in the category XRT (SPDR S&P Retail, Expense Ratio 0.35%) it makes sense to revisit this.
XRT has pulled in >$200 million in recent sessions, bringing its asset base to >$1.3 billion, and giving it a pronounced edge over the next largest “Retail” Equity ETF, RTH (Market Vectors Retail, Expense Ratio 0.35%) which has about $352 million in assets under management currently.
XRT has staggered a bit in recent sessions, catching some support on its 50 day MA this morning but well off its highs of early April. Compared to RTH, and something that we have mentioned on several occasions in this piece prior to today, the fund has a different make up in the sense that XRT employs a modified equal weighting methodology, where the portfolio is re-balanced back to equal weight regularly, whereas RTH is market capitalization weighted.
One can see the difference in exposures simply by looking at the top holdings in each portfolio, for XRT’s top five holdings at the moment are DPLO (1.20%), RAD (1.14%), FRAN (1.14%), FIVE (1.12%) and SIG (1.09%). On the other hand, RTH has a mega cap/large cap slant where more than 95% of the portfolio resides, with top holdings like WMT (9.62%), AMZN (8.91%), HD (8.37%), CVS (7.42%), and WBA (5.36%). XRT from a “market cap” standpoint has a heavy “Small-Cap” concentration (about 38% of the portfolio), a 13% weighting to Micro-Caps, 30% to Mid-Caps, and only 15% to Large Caps and 4% to Mega Caps, thanks to its modified equal weighting approach.
So in simple terms, these two prominent Retail Equity funds are hardly “Apples To Apples” when comparing them. PowerShares also offers a Retail Equity ETF in PMR (PowerShares Dynamic Retail, Expense Ratio 0.63%) but it is much smaller than the aforementioned funds in terms of asset size ($40.7 million in AUM), and generally flies under most radars.
For those looking to trade the Retail sector from a bullish standpoint, Direxion offers RETL (Direxion Daily Retail Bull 3X, Expense Ratio 0.95%) which tracks the Russell 1000 Retail Index on a three times daily leveraged basis. RETS, the “leveraged inverse Bear” sister ETF to RETL unfortunately closed some time ago, apparently due to lack of institutional trading interest.