Equal Sector investing notched another victory earlier this month when the ALPS Equal Sector Weight Exchange Traded Fund (“ETF”) (NYSE: EQL) outperformed the S&P 500 Index in its first year of operations. EQL, which was launched on July 7, 2009, generated a total return of 17.06% vs. 16.74% for the S&P 500 for the year ended July 7, 2010.1
ALPS Equal Sector Weight ETF
|Performance (as of 6/30/2010)|
|Year to Date|
|ALPS Equal Sector Weight ETF|
Banc of America Securities Merrill Lynch Equal Sector
|S&P 500 Total Return Index||-6.65%||17.03%|
Performance as of 6/30/2010.
*Market price returns are based on the midpoint of the bid/ask spread at 4 p.m. ET and do not represent the returns an investor would receive if shares were traded at other times.
Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance may be higher or lower than actual data quoted. Call 1.866.675.2639 or visit www.alpsetfs.com for current month end performance.
While the concept of equal-weight indexing is not altogether new, Equal Sector investing takes a slightly different approach. “Most equal-weight indexes are based at the stock level” states ALPS Director of Investment Research and Strategy, Jeremy Held.* “EQL is an important extension of the equal-weight concept in that it specifically addresses sector risk, which we consider to be a much more important and fundamental risk to client portfolios than individual stocks.”
“Over the last 30 years the largest annual declines in the S&P 500 have been precipitated by a crash in the market’s largest sector. In 1981 it was Energy. In 2000 it was Technology stocks. Most recently in 2008 it was the Financial sector. An Equal Sector strategy can minimize the negative impact of any one sector. At the same time by offering meaningful exposure to each sector of the market, it allows investors the ability to participate in market rallies regardless of where they occur.”
There are signs that the Equal Sector concept may be catching on. In what has been a very challenging environment for new ETF launches EQL raised just over $40 million in the last year. In the crowded large-cap blend ETF category in which 18 new ETFs were launched, only 2 gathered more assets than EQL according to data from Charles Schwab.2
Philip Mead CFA, Chief Investment Officer with Feltz WealthPlan in Omaha, NE, is currently using EQL as part of its US equity strategy. According to Mead, “The Equal Sector ETF acts as a core around which we build complete allocation strategies. The strict rebalancing employed in EQL fits well with the needs of today’s investors. It gives them broad exposure to US equities, but also helps them avoid being overexposed to asset-pricing bubbles.”
For more information on EQL, call (866) 675-2639 or visit www.alpsetfs.com.
About ALPS Advisors, Inc.
ALPS Advisors, Inc.™ is a Denver-based outsourcing solution for administration, compliance, fund accounting, legal, marketing, tax administration, transfer agency and shareholder services.
The ALPS Equal Sector Weight ETF is an ETF of ETFs that delivers exposure to the US Large Cap Equity market by investing equal proportions in each of the 9 Select Sector SPDRs.
ALPS and WealthPlan are unaffiliated entities.
ALPS Distributors, Inc., a registered broker-dealer, is distributor for the ALPS Equal Sector Weight ETF.
*Registered Representative of ALPS Distributors, Inc.
2 Charles Schwab as July 7, 2010.
3 Fund inception date July 6, 2009.
4 The Banc of America Securities (BASMLESW) Merrill Lynch Equal Sector Weight Index is a U.S. equity index comprised, in equal weights, of nine sub-indices. BASMLESW is a price-return index.
The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.
An investor should consider investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus, which contains this and other information, call 1-866-675-2639 or visit www.alpsetfs.com. Read the prospectus carefully before investing.
The Fund’s investment performance, because it is a fund of funds, depends on the investment performance of the Underlying Sector ETFs in which it invests. An investment in the Fund is subject to the risks associated with the Underlying Sector ETFs that comprise the Underlying Index. The Fund will indirectly pay a proportional share of the asset-based fees of the Underlying Sector ETFs in which it invests.
The Fund is subject to the Underlying Sector ETFs Risks, making it subject to certain risks specific to each Underlying Sector ETF. The Fund is considered non-diversified which could cause greater fluctuation in share price than would occur in a diversified fund. An investment in the fund involves risks, including loss of principal.
The S&P 500 Index is the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices. You cannot invest directly in an index.
Tom Carter, 303-623-2577
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