'Equal Weight' S&P 500 Funds Outperform Market as Tech Giants Underperform
The Invesco S&P 500 Equal Weight ETF (RSP) has outperformed traditional market-cap-weighted index funds like the iShares Core S&P 500 ETF (IVV), gaining nearly 16% year to date through August 26, compared with IVV’s 12.4%. This performance gap is attributed to RSP's structure, which assigns equal weightings across all 500 companies in the index at each quarterly rebalance—reducing exposure to underperforming large-cap stocks like Microsoft and Nvidia while increasing exposure to smaller performers. RSP recently crossed $100 billion in assets for the first time on August 19, driven by strong inflows of over $12 billion this year. Morningstar analyst Brendan McCann notes that RSP's outperformance reflects broader market trends where large tech stocks have lagged behind smaller ones within the S&P 500. However, as RSP grows in size, concerns about liquidity for its smallest holdings are emerging. While $100 billion is not yet a constraint, McCann warns that if assets quadruple to around $400 billion, rebalancing could become more challenging.
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