The ETF Show - First Smart Beta ETF Celebrates 20 Years
- 03 mins 50 secs
Chris Dahlin, Factor & Core Equity Strategist for Invesco discusses the Invesco S&P 500® Equal Weight ETF (RSP), the first Smart Beta ETF ever launched - on it’s 20th anniversary - including the thought process behind the fund’s origination, why it’s had staying power, and how it is still helping investors.Channel: ETF
Welcome to this edition of The ETF Show. We're here celebrating the 20th anniversary of the launch of the first Smart Beta ETF, the Invesco, S&P 500 equal-weighted ETF ticker RSP. Joining me today to talk about the fund is Chris Dahlin a factor and core equity strategist with INVESCO. Chris, thank you very much for joining us.
Thanks for having me, Jonathan. It's a pleasure to be here on the New York Stock Exchange.
So congrats again. Congrats again for 20 years. I know it was launched 20 years ago, and we're usually talking about recent launches, but we'll take it back two decades. What was the strategy behind the launch when it was initially sent?
Yeah, you know, it's fun to go back and look at that time because although there are 3200 domestically traded ETFs today, 20 years ago, there was less than 100. And at that time they were primarily market-cap-weighted ETFs. And so the thought was, could there be a better way to build an index and investable index? And so that's where the thought became behind the equal-weight RSP ETF came about. And the thought was, if you could create an equally weighted benchmark, perhaps you can lean into reward investment factors like the small size factor or the value factor. And in equally weighting, you could reduce concentration that is inherent within a market capitalization-weighted ETF. If you look at the S&P 500, for example, right now, about 28% of that higher index weights is in the top ten companies. And so eagerly waiting could, you know, lean into those investment factors, reduce concentration and hopefully provide a better outcome for investors. And over the last 20 years, it's outperformed the cap weighted S&P 500 by about 100 percentage points or about 82 basis points per annum.
So that was going to I was going to ask what's given it staying power, anything other than, well, other than beating the benchmark, which is pretty huge. But any other factors that draw investors to this ETF?
You know, I think the staying power, the secret behind the staying power, is two fold. One, you have to have a sound investment thesis that goes back to my previous comments. The second is you have to find a spot with an investor's portfolio. It has to solve a problem. It has to fit somewhere. And particularly right now for my comment on concentration, I think investors are finding that equally waiting, giving more exposure to more of the positions within the S&P 500, particularly within a very concentrated environment, kind of allows them to pull their core from kind of large growth where S&P is kind of tilting back towards a large blend.
So RCP fits that. I think RB checks both those boxes and I think that's been the key behind its longevity.
And who are the target investors for this fund?
You know, we speak with it's become a $35 billion ETF. Investors have trusted us with $35 billion in assets. And so I think it fits a lot of different investor profiles. I think for, you know, maybe underperforming active managers, it fits that bill. I think we see investors use it again as kind of a compliment to a Baidu core position or just as a way to express an investment thesis that perhaps I want to tell it a little less away from growth, a little more towards value, maybe a little more towards the small size factor.
I think those are all areas where we see investors use RSP.
Well, Chris, thank you very much for joining us today, and congrats again.
Thanks, Jonathan. Appreciate it.
And to our viewers, thanks for watching Asset TV. I'm Jonathan Forsgren. We'll see you next time.