Concentration risk may have been overshadowed by major geopolitical events this year, but it hasn’t gone away. Indeed, the big AI hyperscalers remain a significant part of portfolios, but with that comes risk. Were AI to actually pop like a bubble, portfolios would suffer in turn. Equal weight ETF strategies can help diversify while also performing for investors.
Key Takeaways:
- The equal weight ETF GSEW has returned 12.3% YTD, a solid return for a balanced, equally weighted strategy.
- The fund is also closing in on $2 billion in AUM for the first time, a notable milestone.
- The strategy may be one to watch amid continued tech and AI-related concentration risk.
The equal weight ETF GSEW offers a powerful example. The Goldman Sachs Equal Weight U.S. Large Cap Equity ETF (GSEW ) charges a nine basis point (bps) fee. It weights U.S. large-cap stocks equally, rebalancing each month. Intriguingly, its fee also comes in notably lower than that of key rivals, like the Invesco S&P 500 Equal Weight ETF (RSP ).
GSEW has taken that approach and returned 12.3% YTD in doing so. That return outperformed the ETF Database Large Cap Equities Category average over the same time frame. GSEW produced otherwise strong returns over the last one-year and three-year periods, returning 16.9% and 16.2% over the respective periods.
The ETF is also sending a buy signal according to its tech chart. Per YCharts data, the fund’s price sat above both its 50- and 200-day simple moving averages (SMAs) as of July 14. That traditionally indicates that now could be a good time to buy. GSEW’s AUM is also nearing a notable milestone, approaching $2 billion in total. Currently, it sits at $1.8 billion in AUM.
See more: No Mag 7? No Problem for Active Tech ETF GTEK
What might the fund see for the rest of this year? Much of that has to do with how much volatility and AI concentration risk emerges. Rate hikes may loom, especially if the inflation rate poses further issues. That, or any number of myriad risks to AI, like energy costs, could undercut the march of AI tech forward.
For those looking at ETFs that can help balance out portfolios overall, then, the equal weight ETF could make for a strong option. With volatility the big story this year, it may be worth watching GSEW in the second half.
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