Among the driving forces of success for new exchange traded funds are timing and offering an investment concept that resonates with investors.
The Invesco ESG S&P 500 Equal Weight ETF (RSPE), which is about two weeks old, checks those boxes. The equal-weight answer to the popular Invesco S&P 500 Equal Weight ETF (RSP), RSPE comes to market as investors — both institutional and retail — are flocking to environmental, social, and governance (ESG) funds.
Year-to-date inflows into ESG ETFs and exchange traded products (ETPs) are easily on a record pace.
“Net inflows into Environmental, Social, and Governance (ESG) ETFs and ETPs listed globally of US$ 130 billion which is 49% higher than the record full year 2020 net inflows,” notes ETFGI. “ESG ETFs and ETPs listed globally gathered net inflows of US$11.25 billion during October, bringing year-to-date net inflows to US$130.28 billion which is much higher than the US$54.91 billion gathered at this point last year.”
As noted above, RSPE isn’t even a month old, so judging on the basis of inflows isn’t relevant at this point, though it has nearly $5 million in assets under management, indicating a decent start.
More important than heft is the fact that RSPE debuted as interest in ESG ETFs is accelerating and that it delivers a fresh spin on the successful equal-weight methodology. Tracking the S&P 500 Equal Weight ESG Leaders Select Index — the ESG answer to RSP’s underlying index — RSPE offers investors the benefits they’re used to with an equal-weight ETF with the ESG kicker.
While RSPE holds 185 stocks — far fewer than RSP — the new ESG ETF maintains comparable diversification benefits, minimizing single stock risk in the process. For example, Dollar Tree (NASDAQ:DLTR) is RSPE’s top holding at a weight of just 0.83%.
And, like many traditional equal-weight funds, RSPE has some value exposure, as stocks with the value label represent about 37% of the new fund’s weight. Those benefits and more can help RSPE stand out in a burgeoning field of ESG ETFs.
“The Global ESG ETF/ETP had 834 products, with 2,344 listings, assets of $361 Bn, from 170 providers listed on 40 exchanges in 32 countries. Following net inflows of $11.25 Bn and market moves during the month, assets invested in ESG ETFs/ETPs listed globally increased by 9.1% from $331 Bn at the end of September 2021 to $361 Bn at the end of October 2021,” concludes ETFGI.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.