High beta has been a top-performing factor year to date, with its strong showing continuing into June.
The Invesco S&P 500 High Beta ETF (SPHB), which tracks the S&P 500 High Beta Index, is up 13.6% over one month, while the parent S&P 500 has climbed 5.4%. Year to date, SPHB is outpacing the benchmark by over 500 basis points.
High beta was a leader among factor indexes in May, lifted by its heavy tilt toward the information technology sector. High beta offers the greatest exposure to the information technology sector among all factor indexes. The information technology sector comprises 44% of the S&P 500 High Beta index, while the benchmark S&P 500 gives the sector a 19% weight.
SPHB’s methodology introduced sector tilts to a portfolio. In addition to overweighting information technology, high beta also overweights the consumer discretionary sector compared to the benchmark. Conversely, the high beta factor ETF is significantly underweight to healthcare and consumer staples compared to the benchmark.
“SPHB invests in the more volatile stocks in the broader market has been rewarded this year for its hefty exposure to consumer discretionary and information technology stocks,” Todd Rosenbluth, head of research at VettaFi, said. “The broader market has been led by a handful of stocks this year, many that are SPHB holdings.”
While market breadth has shown recent signs of improving, the market has favored large companies and growth stocks this year. A return to quality sentiment positioned information technology and communication services to be the best-performing sectors during the first quarter.
SPHB has seen $41 million in net flows over one month and $65 million in year-to-date net flows.
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