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ALPS Goes for Equal Weights

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ALPS Equal Sector Weight (EQL) is benchmarked to the Banc of America Securities-Merrill Lynch Equal Sector Weight Index. It owns each of the nine Select Sector SPDR ETFs in equal weights. The nine Select Sector SPDR ETFs are rebalanced back to equal weight on a quarterly basis.

Most equal-weight indexes are based at the stock level,” states ALPS Director of Product Research Jeremy Held. “EQL is an important extension of the equal-weight concept in that it addresses sector risk, which we consider to be a much more important and fundamental risk to client portfolios than individual stocks.”

Held continues: “Over the last 30 years the largest annual declines in the S&P 500 have been precipitated by a crash in the market’s largest sector. In 1981 it was energy stocks. In 2000 it was technology. Most recently in 2008 it was the financial sector. An equal sector strategy minimizes the negative impact of any one sector by diversifying over multiple sectors. At the same time by offering meaningful exposure to each sector of the market, it allows investors the ability to participate in market rallies regardless of where they occur.”