ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Themes
      • Active ETF
      • Artificial Intelligence
      • Beyond Basic Beta
      • China Insights
      • Climate Insights
      • Core Strategies
      • Crypto
      • Direct Indexing
      • Disruptive Technology
      • Energy Infrastructure
      • ETF Building Blocks
      • ETF Investing
      • ETF Education
      • ETF Strategist
      • Financial Literacy
      • Fixed Income
      • Free Cash Flow
      • Innovative ETFs
      • Institutional Income Strategies
      • Leveraged & Inverse
      • Managed Futures
      • Market Insights
      • Modern Alpha
      • Multifactor
      • Responsible Investing
      • Retirement Income
      • Tax Efficient Income
    • Asset Class
      • Equity
        • U.S. Equity
        • Int'l Developed
        • Emerging Market Equities
      • Alternatives
        • Commodities
        • Gold/Silver/Critical Minerals
        • Currency
        • Volatility
      • Fixed Income
        • Investment Grade Corporates
        • US Treasuries & TIPS
        • High Yield Corporates
        • Int'l Fixed Income
    • ETF Ecosystem
    • ETFs in Canada
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Innovative ETFs Channel
  2. Investors Look to Equal-Weight and Quality Factors
Innovative ETFs Channel
Share

Investors Look to Equal-Weight and Quality Factors

Elle CarusoJan 31, 2023
2023-01-31

Investors are looking to the equal-weight and quality factors as they navigate a cloudy economic outlook.

The Invesco S&P 500 Equal Weight Portfolio (RSP A-) and the Invesco S&P 500 Quality ETF (SPHQ A-) are Invesco’s two most popular ETFs year-to-date, as measured by net flows. While equal weight was a favored factor approach in 2022, quality’s surge in interest is unpresented.

“Higher-quality ETFs can serve as a fundamentally focused, modestly lower-risk core equity strategy for advisors,” Todd Rosenbluth, head of research at VettaFi, said. “Quality stocks tend to do better in periods where in general earnings are expected to be weak and investors gravitate to companies with stable cash flows and strong balance sheets.”

SPHQ has taken in $650 million in net flows year-to-date as of January 30, while RSP has seen $1.1 billion in net flows year-to-date. Over a one-year period, SPHQ has accreted $1 billion and RSP has taken in $4.6 billion in net flows. RSP and SPHQ have $36 billion and $4.4 billion in assets, respectively, according to ETF Database.

SPHQ tracks the S&P 500 Quality Index, which includes 100 companies from the S&P 500 that have impressive quality scores, which are calculated based on three fundamental measures: return on equity, accruals ratio, and financial leverage ratio.

Notably, the ETF uses an accruals ratio and not earnings growth, and SPHQ does not have sector constraints that are aligned with the broader market, meaning the fund can significantly over- or underweight certain sectors, according to Rosenbluth.

The sector tilts that quality introduces to a portfolio, as compared to the cap-weighted S&P 500, include overweighting IT, energy, and consumer staples, and underweighting financials, consumer discretionary, and communications, as of December 30.

Equal weighting comprises every constituent of the S&P 500, giving each company an equal weight at each quarterly rebalance. Equal weight provides exposure to the small size, value, and dividend factors, while tilting away from quality.

The sector tilts introduced by equal weight include overweighting industrials, real estate, materials, and utilities, and underweighting IT, healthcare, and communications.

RSP and SPHQ are up 5.63% and 3.57%, respectively, compared to the S&P 500’s gain of 4.75% during the same period. Over a one-year period, RSP is down just 0.88%, while SPHQ and the S&P 500 are down 7.76% and 7.83%, respectively, each on a total return basis.

For more news, information, and analysis, visit the Innovative ETFs Channel.

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X