Is ALPS Equal Sector Weight ETF (EQL) a Strong ETF Right Now?

The ALPS Equal Sector Weight ETF (EQL) was launched on 07/07/2009, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Blend category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is managed by Alps. EQL has been able to amass assets over $519.41 million, making it one of the average sized ETFs in the Style Box - Large Cap Blend. Before fees and expenses, EQL seeks to match the performance of the NYSE Select Sector Equal Weight Index.

The NYSE Equal Sector Weight Index comprises of all active Select Sector SPDR ETFs in an equal weighted portfolio. These sector includes Consumer Discretionary, Consumer Staples, Materials, Energy, Technology, Utilities, Financial, Industrial, Health Care & Real Estate.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Operating expenses on an annual basis are 0.25% for this ETF, which makes it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 1.83%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Taking into account individual holdings, Consumer Discretionary Select Sector Spdr Fund (XLY) accounts for about 9.28% of the fund's total assets, followed by Consumer Staples Select Sector Spdr Fund (XLP) and Energy Select Sector Spdr Fund (XLE).

The top 10 holdings account for about 91.14% of total assets under management.

Performance and Risk

The ETF has lost about -1.10% so far this year and it's up approximately 9.02% in the last one year (as of 04/30/2025). In the past 52-week period, it has traded between $37.36 and $44.40.

EQL has a beta of 0.92 and standard deviation of 16.02% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 12 holdings, it has more concentrated exposure than peers.

Alternatives

ALPS Equal Sector Weight ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.

SPDR S&P 500 ETF (SPY) tracks S&P 500 Index and the Vanguard S&P 500 ETF (VOO) tracks S&P 500 Index. SPDR S&P 500 ETF has $575.77 billion in assets, Vanguard S&P 500 ETF has $585.72 billion. SPY has an expense ratio of 0.09% and VOO charges 0.03%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Blend.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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This article originally published on Zacks Investment Research (zacks.com).

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