Rydex/SGI, the Rockland, Md.-based money management firm known
for its equal-weighted S&P 500 ETF (NYSEArca:RSP), launched
another two equal-weighted ETFs that extend the companyâs
coverage of the S&P-indexed U.S. equities universe to include
companies of small and mid-capitalization.
The Rydex S&P MidCap 400 Equal Weight ETF (NYSEArca:EWMD)
and the Rydex S&P SmallCap 600 Equal Weight ETF (NYSEArca:EWSM)
join the companyâs first-to-market equal weighted Rydex S&P
500 Equal Weight ETF (NYSEArca:RSP). Both new funds, as well as
RSP, have annual expense ratios of 0.40 percent.
Launched back in 2003, RSP has gathered $3.2 billion in assets
by offering what the company says is broader diversification on the
S&P 500 pool of securities than, say, cap-weighted strategies
such as State Street Globalâs SPDR S&P 500 (NYSEArca:SPY) and
the iShares S&P 500 ETF (NYSEArca:IVV).
RSP has outperformed year-to-date its cap-weighted counterparts,
raking in 7.7 percent in gains while SPY and IVV have returned less
than 6 percent in the same time period, according to data compiled
But RSP remains the smaller player in the space in terms of
assets, suggesting that investors still seem generally comfortable
with traditional cap-weighted methodologies. SPY is the worldâs
largest ETF with nearly $93 billion in assets while IVV has
gathered more than $27 billion since its 2000 inception.
Still, Rydex is betting on the growing following of
equal-weighted methodologies. EWMD and EWSM are not Rydexâs first
go at the S&P small and mid-cap segments. The company also
manages a lineup of âpure growthâ strategies that include
(NYSEArca:RZG), (NYSEArca:RFG) and (NYSEArca:RPG).
EWMD tracks the equal-weighted version of the S&P MidCap 400
Index. Therefore it includes the same mid-size companies comprising
the market-capitalization weighted index, but each component is
assigned an equal weight. The portfolio is rebalanced quarterly.
The S&P MidCap 400 covers more than 7 percent of the U.S.
Financials, industrials, information technology and consumer
discretionary names represent roughly two-thirds of the portfolio,
a sector allocation that is very similar to the cap-weighted
version of the S&P MidCap 400 Index. But the company said on
its website that the equal-weighting methodology allows for broader
From an individual security perspective, companies like Green
Mountain Coffee Roaster and Vertex Pharmaceuticals each represent
almost 1 percent of the cap-weighted mix, but in EWMD they are each
assigned about a quarter of that weight, again in amounts equal to
the other components in the fund.
EWSM meanwhile taps into the small-capitalization segment of the
S&P equities universe through an equal weighted version of the
S&P SmallCap 600 Index. That benchmark represents about 3
percent of all U.S. equities.
Information technology is the fundâs biggest sector
allocation, representing nearly 22 percent of the portfolio,
followed by consumer discretionary names and financials.
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