ALPS Offering An ETF Of The Nine Select Sector SPDR ETFs

ALPS has launched a new Equal Sector Weight ETF of ETFs (EQL) that provides an equal weight position in each of the nine Select Sector SPDR ETFs (see IndexUniverse article). The fund rebalances the sector positions every quarter. The attraction of the fund, beyond not needing to invest in nine different ETFs in order to get sector diversification, is that it is designed to avoid over-investment in “bubble” sectors that may have run-up too far, too fast. When their strategy was back-tested over the last 10 years, the EQL strategy of reducing the spread in sector returns outperformed the S&P 500 by more than 3% per year. The EQL ETF charges 0.55% in annual expenses, which includes the assumed 0.21% in expenses for the underlying nine Select Sector ETFs. The EQL ETF sounds like an interesting and useful product, although it is not entirely clear how accurate one can measure when to reduce exposure to bubble sectors going forward.