Invesco’s equal-weight tech ETF is seeing a notable jump in interest following first quarter earnings.
The Invesco S&P 500 Equal Weight Technology ETF (RYT) saw over $319 million in net flows on May 10, following better-than-expected first quarter earnings reports from companies in the information technology sector.
“A strong earnings season for information technology companies has encouraged investors to take a more diversified approach to the sector,” Todd Rosenbluth, head of research at VettaFi, said.
Under the Hood of Invesco’s Equal-Weight Tech ETF
RYT’s underlying index gives component companies equal allocations at each quarterly rebalance. This results in exposure that is considerably more balanced than other alternatives. An equal-weight approach is particularly impactful in the top-heavy tech sector, which is dominated by just a handful of names.
In a cap-weighted tech sector ETF, just two names — Microsoft Corporation (MSFT) and Apple Inc (AAPL) — comprise nearly 50% of the total fund by weight. Just two names largely drive performance despite the fund holding 64 securities in total.
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RYT has climbed 6.5% year-to-date as of May 11 and has rallied 6.6% over a one-year period. The recent top-performing holdings in RYT include Tyler Technologies Inc. (TYL), NVIDIA Corporation (NVDA), Microsoft Corporation (MSFT), Salesforce Inc. (CRM), and Apple Inc. (AAPL). Tyler Technologies is given a higher weight in RYT compared to a cap-weighted fund, which gives the security a 0.2% weight.
In the upcoming webcast on May 15, “How can an equal weight approach lead to potential outperformance?” Invesco and VettaFi will discuss the potential benefits of using an equal-weight approach in today’s market environment with concentration risk near all-time highs.
For more news, information, and analysis, visit the Portfolio Strategies Channel.