New ETF Designed to Minimize Single-Sector Impact on Returns

The fund is an exchange-traded fund (ETF) of ETFs and will seek to track the performance of the Bank of America Securities – Merrill Lynch Equal Sector Weight Index by owning each of the nine Select Sector SPDR ETFs in equal weights, according to an announcement. The nine Select Sector SPDR ETFs will be rebalanced back to equal weight on a quarterly basis.

“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 stocks. In 2000 it was technology. Most recently in 2008 it was the financial sector. An equal-sector strategy minimizes the negative impact of any one sector by diversifying over multiple sectors. 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,” said Jeremy Held, ALPS director of Product Research, in the announcement.

According to Held, the Sector SPDR ETFs have been used by both financial advisers and institutional investors to create their own equal sector strategy for years, but ALPS feels that offering the strategy in a packaged ETF solution will make the advantages of equal-sector investing available to a wider range of investors.

EQL will be the second ETF sponsored by ALPS, which is also the sponsor of the Cohen & Steers Global Real Estate ETF (GRI), which was launched in May of 2008.