RSP Flourishes as ETF Investors Bet on Mag-7 Slip
RSP has seen $2 billion of inflows in the past month.
Can the S&P 493 beat the Magnificent Seven? That’s what some ETF investors are hoping will happen.
Over the past month, more than $2 billion has flowed into the Invesco S&P 500 Equal Weight ETF (RSP), an ETF that deemphasizes the megacap stocks that dominate the traditional S&P 500.
RSP has seen an impressive $9.4 billion in inflows since the beginning of the year, helping boost its assets under management to $66.8 billion.
From the start of 2024, the S&P 500 Equal Weight Index that RSP tracks has lagged the market cap weighted S&P 500. RSP is up 15.2%, 870 basis points less than the 23.9% gain for the SPDR S&P 500 ETF (SPY).
RSP Sees Huge Inflows in 2024
The gap largely stems from the enormous outperformance of megacap tech stocks like Nvidia (up 190% year-to-date) and Meta (up 75% year-to-date).
While RSP still owns those stocks, they each have a small weighting in the ETF—around 0.2%— which is similar to the hundreds of other stocks in the portfolio.
In aggregate, the Magnificent Seven make up about 1.5% of RSP’s portfolio versus 31.5% for the iShares Core S&P 500 ETF (IVV).
If megacap stocks keep outperforming, IVV and other S&P 500 ETFs will keep beating RSP. But if they begin underperforming, the equal-weighted fund can start to shine.
There have been moments this year where it looked like that was starting to happen. After ballooning to more than 13 percentage points in July, the gap between the year-to-date performance for IVV and SPY shrunk to 5.5 in August.
But the brief period of outperformance didn’t last long, and the gap has since widened to 8.7.
Perhaps that will change later this year or next year; investors in RSP seem to think so. Still, even though a meaty $9.4 billion has gone into the ETF in 2024, that’s only a fraction of the inflows that traditional S&P 500 ETFs have seen.
Year-to-date inflows for the Vanguard S&P 500 ETF (VOO) are a whopping $82 billion, suggesting that most investors are content with large exposure to mega-cap stocks.
