Despite value’s recent underperformance, ETFs providing a value tilt are seeing interest from investors.
Concentration risk has driven the turnaround in appetite for value with more than half (52%) of investors increasing their allocations to value in the past 12 months, according to Invesco.
Investors are increasing their value exposure as they seek a potential concentration hedge against U.S. mega-cap tech companies. The continued growth of U.S. mega-cap technology companies has led to increased concentration in the global equity markets which may create unintended risks in multi-asset portfolios, Mo Haghbin, Head of Solutions, Multi-Asset Strategies, Invesco, said in a statement.
The Invesco S&P 500® Equal Weight ETF (RSP ) offers exposure to the S&P 500 with a value tilt. The fund has received considerable attention recently, garnering $1.6 billion in net flows over the past four weeks and $9.5 billion year to date.
The equal weight fund took in $12.8 billion in net flows in 2023, $5.2 billion in 2022, and $7.8 billion in 2021. RSP garnered net flows totaling $684 million in 2020 and just $49 million in 2019.
How Equal Weight RSP Provides Value Tilt
RSP tracks the S&P 500 Equal Weight Index, which effectively gives every security in the S&P 500 an equal weight at each quarterly rebalance. Equal weight’s methodology of selling relative winners and buying relative losers adds the value factor tilt to a portfolio.
Equal-weighted strategies can provide diversification benefits and reduce concentration risk by weighting each constituent company equally so that a small group of companies does not have an outsized impact on the index.
RSP is up 14.5% year to date through October 29 compared to the S&P 500’s 23.7% gain. However, the Invesco ETF outperformed the S&P 500 by 4% during the third quarter.
See more: Equal-Weight RSP Beats S&P 500 in Q3
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