The addition of the two equal weight (EW) ETFs – the Rydex S&P SmallCap 600 Equal Weight ETF and the Rydex S&P MidCap 400 Equal Weight ETF – brings Rydex’s total number of EW ETFs to 18 and total number of exchange traded products to 36, with assets over $9 billion.
Rydex says its Rydex S&P Midcap 400 Equal Weight ETF (ticker: EWMD) and Rydex S&P SmallCap 600 Equal Weight ETF (ticker: EWSM) offer “broad exposure” to the companies in the S&P MidCap 400 Equal Weight Index (EWI) and the S&P SmallCap 600 (EWI), respectively. Both EW ETFs invest in the same stocks as their cap weight versions, have equal exposure to each stock and are rebalanced quarterly, according to Rydex.
“Rydex has been a pioneer in the ETF space since the 2003 launch of our flagship ETF Rydex S&P 500 Equal Weight ETF (RSP),” said Jim King, ETF portfolio manager at Rydex|SGI. “The new ETFs provide investors access to two additional ways to employ an equal weight approach in portfolio construction, allowing them to increase performance potential and diversify holdings,” he said.
Equal weight indices are typically comprised of the same constituents as their cap-weighted equivalents but each component is equally weighted — which Rydex says provides the following potential benefits:
- Performance Potential. An equal weight approach reduces the bias towards the largest companies within a particular cap-weighted strategy. The smaller companies may help an equal weight strategy outperform when large caps are not in favor, though when large stocks are in favor, equal weight strategies may underperform, according to Rydex.
- Diversification. While diversification does not assure a profit nor eliminate the risk of experiencing investment losses, Rydex notes that it may help reduce concentration risk and provide more balanced exposure across market capitalizations, sectors and other broad risk factors.
- Disciplined rebalancing. As portfolios are regularly rebalanced back to equal-weight, they take profits on outperforming components of the index-such as specific companies or sectors. This rebalancing may help balance risk factors and provide enhanced risk control.
Rydex manages approximately $26 billion in assets — including more than $9.5 billion in exchange traded product assets, according to the announcement.