Outpacing every other S&P 500 market segment, the energy sector has roared back this year, with one broad energy exchange traded fund standing out from the rest.

The Guggenheim S&P 500 Equal Weight Energy ETF (NYSEArca: RYE) has been the best performing broad energy sector-related ETF of the 2016, increasing 38.0% year-to-date, compared to the 26.5% gain in the widely monitored Energy Select Sector SPDR (NYSEArca: XLE).

The outperformance in RYE may be explained in its alternative indexing methodology. As opposed to traditional beta-index ETFs, like XLE that reflects a cap-weighted index like the S&P 500 Energy Index, the Guggenheim Energy ETF equally weights its components so that smaller companies have a larger tilt in its underlying portfolio.

As we have witnessed this year, the rally in energy stocks on the back of rising crude oil prices helped smaller midsized companies outperform the more cumbersome large-cap segment.

RYE’s largest position in Transocean (NYSE: RIG) only amounts to 3.5% of its underlying portfolio, and due to its indexing methodology, the mid-cap category makes up a hefty 46.9% of the ETF’s portfolio, along with 44.9% large-caps and 8.2% mega-caps.

In contrast, XLE follows a traditional cap-weighted index, with a hefty 16.4% position in Exxon Mobil (NYSE: XOM) and 14.7% in Chevron (NYSE: CVX). Consequently, the fund is more top heavy with a 39.5% position in mega-caps, 44.4% in large-caps and 16.1% in mid-caps.

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