Leading by five-year returns in ALPS’ lineup of ETFs is the ALPS Equal Sector Weight ETF (EQL), which offers unique exposure to the domestic equity market.
EQL has returned 56.6% over a five-year period. The fund is down 12.8% year-to-date but is still outperforming the S&P 500, tracked by the SPDR S&P 500 ETF Trust (SPY), which is down 19.1%, according to YCharts.
EQL utilizes a fund-of-funds ETF structure, delivering exposure to the U.S. large-cap equity market by investing equal proportions in 11 Select Sector SPDRs. EQL rebalances quarterly to maintain equal weighting of the sectors. The fund delivers moderate yet meaningful exposure to every sector of the market, according to ALPS.
The Select Sector SPDR ETFs are a set of products that divide the S&P into 11 index funds traded throughout the day on NYSE Arca, according to State Street.
By giving each sector of the U.S. large-cap equity market an equal weight, EQL has a drastically different composition relative to market cap-weighted products such as SPY, according to VettaFi.
Compared to SPY, EQL underweights information technology, healthcare, consumer discretionary, and financials. On the other side, EQL overweights energy, communication services, industrials, consumer staples, utilities, real estate, and materials.
The tilts away from certain growth sectors, as well as the overweighting of defensive sectors, has contributed to EQL’s outperformance this year.
The fund has been gaining in popularity this year as the benefits of equal weight are amplified in the current environment, leading to outperformance. EQL, which has $293 million in assets, has taken in $102 million in year-to-date inflows, according to VettaFi.
This ETF has a net expense ratio of 28 basis points.
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