Invesco has launched Canada’s first exchange-traded fund (ETF) to provide equal-weight exposure to the companies that make up the S&P 500 Index: Invesco S&P 500 Equal Weight Index ETF (EQL).
This launch comes after Invesco Ltd.’s recent acquisition of Guggenheim’s ETF business in the US.
EQL seeks to replicate, to the extent reasonably possible and before fees and expenses, the performance of the S&P 500 Equal Weight Index or any successor thereto on an unhedged basis, in the case of any unhedged units, or on a hedged basis, in the case of any hedged units. EQL invests, directly or indirectly, primarily in equity securities of companies listed in the United States.
“One of the challenges investors face in tracking a market-capitalisation-weighted index is that the index may have concentration-risk issues,” says Jasmit Bhandal, Head of ETF Product Strategy and Development with Invesco Canada. “The S&P 500 is currently heavily concentrated in a few securities, with the FAANG companies – Facebook, Apple, Amazon, Netflix and Alphabet (Google) – making up almost 12 per cent of the index. A significant portion of the returns are driven by these few securities.”
To help investors avoid such overweighting, EQL tracks the S&P 500 Equal Weight Index, which weights each company at 0.2 per cent at each quarterly rebalancing.
“This ETF gives investors an alternative way to get exposure to the US equity market,” says Bhandal.
The initial offering of Invesco S&P 500 Equal Weight Index ETF has now closed. Units in the ETF are now available for trading on TSX.
Three series allow investors to choose the currency exposure that best suits their unique investment goals: CAD-unhedged (EQL), USD-unhedged (EQL.U) and CAD-hedged (EQL.F)