Small Cap Tilts With Equal Weight ETFs

July 24, 2014

Portfolio Effect

To analyze the effect using equal-weight ETFs may have on a portfolio, I will use the following hypothetical portfolios:

Index (Bloomberg Ticker) Portfolio A Portfolio B
Market Cap Large 1 SPXT 25 20
Equal Weight Large 1 SPXEWTR 0 5
Market Cap Large 2 RU10INTR 25 20
Equal Weight Large 2 RU1ELCTR 0 5
Market Cap Mid RUMCINTR 15 10
Equal Weight Mid RUMEMCTR 0 5
Market Cap Small RU20INTR 15 15
Market Cap EM NDUEEGF 10 5
Equal Weight EM M1EFEWGT 0 5
Market Cap MLP AMZX 10 5
Equal Weight MLP MLPXTR 0 5

Because many of the ETFs were brought to market at the end of 2010, I’ll use the appropriate index’s monthly total return—net of the fund expense ratio—to get a longer-dated analysis. Because of a lack of historical data, I’ll only use the market-weighted small-cap exposure in this analysis.

The results are as follows:


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