Equal weight ETFs have pulled in over $2bn inflows in September as investors seek out more balanced exposure amid persistent market volatility.
The $3.6bn iShares S&P 500 Equal Weight UCITS ETF (ISPE) saw $1.2bn inflows over the month, while the $6.5bn Xtrackers S&P 500 Equal Weight UCITS ETF (XDEW) gained $750m of net new assets, according to data from ETFbook.
Meanwhile, the Xtrackers $1.4bn S&P 500 Equal Weight ESG UCITS ETF (XZEW) pulled in $560m.
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 US elections in November and ongoing geopolitical tensions.
Equally weighted strategies help to mitigate concentration risks from ‘magnificent 7’ stocks, which make up over a third of the S&P 500.
Other strategies have also been launched to avoid overconcentration risks which include Xtrackers MSCI World ex USA UCITS ETF (EXUS) – which launched in March – and allows investors to separate their US 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 launched Europe’s first ETF providing equal weight exposure to the popular MSCI World index, bringing its equally weighted range to three.
