Equal Weight ETFs Record Over $2B in September Inflows
Equal weight ETFs have pulled in over $2 billion in inflows in September as investors seek out more balanced exposure amid persistent market volatility.
The $3.6 billion iShares S&P 500 Equal Weight UCITS ETF (ISPE) received $1.2 billion in inflows over the month, while the $6.5bn Xtrackers S&P 500 Equal Weight UCITS ETF (XDEW) gained $750 million of net new assets, according to data from ETFbook.
Meanwhile, the Xtrackers $1.4 billion S&P 500 Equal Weight ESG UCITS ETF (XZEW) pulled in $560 million.
Equal Weight S&P 500 ETF Benefits
The diversification benefits of equally weighted ETFs continue to appeal to investors as market volatility is expected to persist, particularly in light of the looming U.S. elections in November and ongoing geopolitical tensions. The S&P 500 was trading near its all-time closing high (its 42nd record of the year), set on Thursday. The Vanguard S&P 500 ETF (VOO) was trading slightly down on Friday afternoon, along with other major S&P-tracking funds.
Investors have been buoyed by recent data showing sustained decreases in inflation and solid economic growth, but they remain wary about the prospects of recession.
Equally weighted strategies help to mitigate concentration risks from ‘magnificent 7’ stocks, which make up over a third of the S&P 500.
Other ETF Strategies to Diversify Portfolios
Other strategies have also been pursued to avoid overconcentration risks. They include Xtrackers MSCI World ex USA UCITS ETF (EXUS), which debuted in March, and allows investors to separate their U.S. equity allocations.
Speaking at ETF Stream’s ETF Ecosystem Unwrapped in May, Elroy Dimson, professor of finance at Cambridge Judge Business School, called the strategy “an appallingly bad idea” as they “sell the winners and buy the losers” to get back to equal weight.
Invesco recently introduced Europe’s first ETF providing equal weight exposure to the popular MSCI World index, bringing its equally weighted range to three.
This article first appeared in etf.com's sister publication, ETFStream.com.