Mazza also showed that the revenue-weighting strategy may also hold up well in both growth- and value-oriented markets. During a value market environment, revenue weighting significantly outpaced the market and growth benchmarks while capturing the upside of value. Additionally, during heavy growth market conditions, while revenue weighting undermentioned pure growth, the weighting methodology still kept pace with the market and outperformed the value benchmark.
“Revenue weighting provides strong performance relative to blend, value, and growth benchmarks over the course of the full market cycle,” Mazza said.
For example, Levitt said the Oppenheimer Large Cap Revenue ETF (NYSEArca: RWL), Oppenheimer Mid Cap Revenue ETF (NYSEArca: RWK) and Oppenheimer Small Cap Revenue ETF (NYSEArca: RWJ) have each outperformed their category benchmark over the past 10 years and now rank in the top quartile of their respective 10-year peer group.
Other revenue-weighted ETF options include Oppenheimer Ultra Dividend Revenue ETF (NYSEArca: RDIV), Oppenheimer Financials Sector Revenue ETF (NYSEArca: RWW), Oppenheimer Global Revenue ETF (NYSEArca: RGLB), Oppenheimer International Revenue ETF (REFA), Oppenheimer Emerging Markets ETF (REEM), Oppenheimer ESG Revenue ETF (ESGL), and Oppenheimer Global ESG Revenue ETF (ESGF).
When building a diversified portfolio, Sharon French, Head of Beta Solutions for OppenheimerFunds, believed that revenue-weighted strategies may be a good fit for advisors and their clients to transition from traditional brokerage to a fee-based model as the indexing methodology can avoid unintended exposures through plain vanilla market-cap weighting. A revenue-weighting methodology may allow for further control of expected investment outcome.
Financial advisors who are interested in learning more about a revenue-weighted investment approach can watch the webcast here on demand.