The ALPS Equal Sector Weight ETF (EQL) made its debut on 07/07/2009, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Large Cap Blend category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is managed by Alps, and has been able to amass over $395.47 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the NYSE Select Sector Equal Weight Index.
The NYSE Equal Sector Weight Index comprises of all active Select Sector SPDR ETFs in an equal weighted portfolio. These sector includes Consumer Discretionary, Consumer Staples, Materials, Energy, Technology, Utilities, Financial, Industrial, Health Care & Real Estate.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.25%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.70%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Taking into account individual holdings, Materials Select Sector Spdr Fund (XLB) accounts for about 9.37% of the fund's total assets, followed by Technology Select Sector Spdr Fund (XLK) and Consumer Discretionary Select Sector Spdr Fund (XLY).
The top 10 holdings account for about 91.21% of total assets under management.
Performance and Risk
The ETF has added roughly 18.49% and is up about 32.59% so far this year and in the past one year (as of 10/23/2024), respectively. EQL has traded between $96 and $129.32 during this last 52-week period.
EQL has a beta of 0.95 and standard deviation of 15.43% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 12 holdings, it has more concentrated exposure than peers.
Alternatives
ALPS Equal Sector Weight ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P 500 ETF (IVV) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY) tracks S&P 500 Index. IShares Core S&P 500 ETF has $548.08 billion in assets, SPDR S&P 500 ETF has $601.21 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Blend.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Get it free >>ALPS Equal Sector Weight ETF (EQL): ETF Research Reports
SPDR S&P 500 ETF (SPY): ETF Research Reports
Technology Select Sector SPDR ETF (XLK): ETF Research Reports
Materials Select Sector SPDR ETF (XLB): ETF Research Reports
Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
iShares Core S&P 500 ETF (IVV): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
