Guggenheim Investments has launched the Guggenheim S&P 100 Equal Weight ETF (OEW), the first exchange traded fund to provide equal weight access to the popular index.
Guggenheim, which pioneered strategic beta with the introduction of Guggenheim S&P 500 Equal Weight ETF (RSP) in 2003, created OEW to provide investors with equal weight access to 100 of the largest and most stable companies in the S&P 500 as represented by the S&P 100 Equal Weight Index.
Guggenheim’s equal weight equity ETFs are designed to provide performance potential, more diversified opportunities, and disciplined rebalancing.
OEW is the 15th equal-weight offering in Guggenheim’s ETF product line.
“OEW offers strategic beta exposure to large, blue-chip stocks across multiple industry groups and could serve as a core holding in a diversified portfolio,” says William Belden, managing director and head of ETF business development for Guggenheim Investments. “OEW’s portfolio constituents typically are household names with strong brand recognition and global operations.”
The cap-weighted S&P 100 Index (OEX) consists of 100 companies selected from the S&P 500. To be included, the companies should be among the larger and more stable companies in the S&P 500, and must have listed options. Sector balance is considered in the selection of companies for the cap-weighted S&P 100, which is widely used for derivatives and is the index underlying the OEX options.
“We are excited that Guggenheim has licensed the S&P 100 Equal Weight Index to grow its family of equal-weighted ETFs, which track S&P-branded indices,” says Philip Murphy, vice president, S&P Dow Jones Indices. “Unlike market-cap weighted indices, every constituent of the S&P 100 Equal Weight Index has the same impact on performance. The unique design of the index provides a balanced view of the industry-leading companies in every sector.”
The top 20 stocks in the cap-weighted S&P 100 represent more than 45 per cent of that index. By comparison, the top 20 stocks comprise just 20 per cent of the S&P 100 Equal Weight Index.
“Equal weight strategies represent an alternative to traditional cap-weighted strategies, which have several potential drawbacks,” Belden says.
“Cap-weighting can lead to over-concentration in a small group of the index’s largest stocks. Additionally, cap-weighting can cause a bias towards companies that have experienced growth runs. This may hamper performance by overweighting overvalued stocks and, conversely, underweighting undervalued ones.”
