Two of Invesco’s equal-weight sector ETFs have seen significant flows recently as advisors allocate to sectors positioned to outperform.
Many advisors utilize sector rotation strategies as a way to generate alpha for clients. Nearly 27% of advisors recently polled said their approach to sector allocation is to rotate sectors that they believe will outperform the broader market in different market scenarios. Conversely, nearly 18% of respondents said they avoid sectors that they believe are likely to underperform the market, according to “How can an equal weight approach lead to potential outperformance?” (Date: May 15, 2023. Sample size: 257 respondents, 37.7% RIAs.)
The Invesco S&P 500 Equal Weight Consumer Staples ETF (RHS) and the Invesco S&P 500 Equal Weight Technology ETF (RYT) are the most popular funds in Invesco’s lineup of equal weight sector ETFs over one-week and four-week periods.
See more: “How Equal Weighting at the Stock Level Impacts Sector Exposures“
RHS has seen $200 million in one-month net flows and $370 million in flows over three months. Meanwhile, RYT has seen $257 million in net flows over one month and $385 million over three months.
“Defensive sectors like consumer staples tend to do better during the historically volatile summer months. It is good to see consistent flows as a sign of broader adoption by advisors,” Todd Rosenbluth, head of research at VettaFi, said.
An equal-weight approach is particularly impactful in the top-heavy information technology and consumer staples sectors. The largest five companies in the S&P 500 information technology sector comprise 66.2% of the index by weight. Meanwhile, the largest five companies in the S&P 500 consumer staples sector comprise 51.2% of the index by weight.
Top-Performing Stocks in RYT and RHS
The top-performing holdings in RYT recently include Tyler Technologies Inc. (TYL), NVIDIA Corporation (NVDA), Microsoft Corporation (MSFT), Salesforce Inc. (CRM), and Apple Inc. (AAPL).
The five top-performing stocks in RHS recently include McCormick & Company, Inc. (MKC), Molson Coors Beverage Company (TAP), Mondelez International, Inc. (MDLZ), Monster Beverage Corporation (MNST), and Kimberly-Clark Corporation (KMB).
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