Due to its factor-based and equally weighted indexing methodology, FXL has a larger tilt toward mid-cap companies at 55.7% of the fund’s portfolio, along with 13.1% mega-caps, 29.1% large-caps and 2.2% small-caps.
In contrast, the S&P 500 Information Technology Index, which follows a traditional market cap-weighting methodology, focuses on prominent names like Apple, Microsoft and Facebook, which make up about 15%, 11% and 7% of the overall weights. Furthermore, the index includes a hefty 71% tilt toward mega-cap companies and 22% to large-caps.
Large-cap tech companies have outperformed this year as investors focused on high-growth names, which should allowed the S&P Tech segment to outperform a fund with a greater focus on mid- and small-sized companies. However, FXL’s heavy tilt toward the outperforming semiconductors segment may have allowed the smart beta ETF to make up for its deficiencies.
For more information on the tech sector, visit our technology category.