db X-trackers Launches Equal Weight FTSE 100 ETF

db X-trackers has launched an exchange traded fund (ETF) that tracks the FTSE 100 index but allocates equal weight to each stock.

The maket capitalisation-weighted index is adjusted so each of the 100 stocks receive a weighting of 1 percent in the ETF, with the aim of improving risk-adjusted returns.

The distributing fund costs 0.25 percent per year, and is rebalanced every six months.

“Removing the large cap bias effectively increases the weighting to the smaller cap companies in the index, which may improve the risk-adjusted performance over the long term,” said Michael Mohr, head of exchange-traded product development, EMEA, at Deutsche Asset & Wealth Management.

DeAWM research shows that an equal weight FTSE 100 approach would have outperformed its market cap counterpart by 2.6 percent every year between December 2004 and May 2015.

The provider has also launched a USD-hedged version of its Nikkei 400 ETF. It now has a total of €24.6 billion assets under management in its physical ETFs.