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?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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
EQL is managed by Alps, and this fund has amassed over $400.20 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Blend. This particular fund seeks to match the performance of the NYSE Select Sector Equal Weight Index before fees and expenses.
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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.25%.
EQL's 12-month trailing dividend yield is 1.24%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Consumer Discretionary Select Sector Spdr Fund (XLY) accounts for about 9.91% of the fund's total assets, followed by Communication Services Select Sector Spdr Fund (XLC) and Financial Select Sector Spdr Fund (XLF).
Its top 10 holdings account for approximately 91.79% of EQL's total assets under management.
Performance and Risk
So far this year, EQL has added about 16.63%, and is up about 18.21% in the last one year (as of 12/23/2024). During this past 52-week period, the fund has traded between $107.45 and $133.20.
The ETF has a beta of 0.96 and standard deviation of 15.31% for the trailing three-year period, making it 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 $584.95 billion in assets, SPDR S&P 500 ETF has $633.49 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
Financial Select Sector SPDR ETF (XLF): ETF Research Reports
Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
iShares Core S&P 500 ETF (IVV): ETF Research Reports
Communication Services Select Sector SPDR ETF (XLC): 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.
