Invesco expands Equal Weight range with ETF offering advantage of a swap-based approach

Invesco is launching an ETF that tracks the performance of the S&P 500 Equal Weight index while providing the structural advantages of the firm’s multi-counterparty swap-based model.

The index followed by the Invesco S&P 500 Equal Weight Swap UCITS ETF is constructed from the parent S&P 500 index by including the same constituent securities but equally weighting them at each rebalancing date rather than the standard method of weighting companies by their market capitalisation.

The new Invesco ETF is the first swap-based equal weight ETF in the world. For investors looking for exposure to the S&P 500 Equal Weight Index, the firm now offers both physical and swap-based ETFs so investors can choose their preferred replication method. 

Gary Buxton, Head of EMEA and APAC ETFs at Invesco, said: “We are excited to kick off the new year with an ETF that combines two of Invesco’s largest and most well-established areas of expertise. Globally, we are a market leader in equal-weight equity exposures, an area of rapid growth where we saw European demand really accelerate in 2024, and we are now delivering it via the robust and highly efficient swap-based structure we created more than 15 years ago. We have the largest swap-based ETF in the world, and investors can now benefit from the same proven advantages for their S&P 500 Equal Weight exposure.”

Demand for equal weight strategies has been growing since mega-cap valuations began looking stretched, with concentration in the largest holdings at multi-decade highs, and investors wanting a more balanced exposure. This trend has been most evident in US-exposed equities, where $10 billion of net flows into S&P 500 Equal Weight ETFs since July has more than doubled their assets under management. The 10 largest stocks still account for 37% of the S&P 500 index in terms of market capitalisation, so concentration remains at historically high levels.

Unlike products currently on the market, the new Invesco ETF will track the performance of the S&P 500 Equal Weight index through swap-based replication. The ETF will hold a basket of quality equities and deliver the index performance through swap contracts with large financial institutions. These swap counterparties will pay the ETF the return of the index, minus an agreed fee, in exchange for the return of the basket of equities held by the ETF.  

Chris Mellor, Head of EMEA ETF Equity Product Management at Invesco, explained: “When a Europe-domiciled ETF uses swaps to track certain core US indices, the swap counterparties are not required to pay tax on the dividends. That enables us to negotiate better terms with those swap counterparties, including receiving the gross return on the index, which is a demonstrable advantage over a physically replicated ETF that typically pays a 15% tax on dividends. In the case of S&P 500 Equal Weight, this corresponded to around a 0.2% p.a. improvement based on current dividend levels.”

Fiona Boal, Global Head of Equities at S&P Dow Jones Indices, said: “S&P Dow Jones Indices is pleased to continue collaborating with Invesco on their Equal Weight product suite. Investor interest in applying an equal-weight methodology to broad-market, large-cap equity indices, such as the S&P 500, continues to grow. This approach to large-cap U.S. equities is particularly compelling in the current market environment.”

Invesco has been a stalwart in the swap-based replication model, with an unbroken track record of more than 15 years and over US$65 billion of assets accumulated in its swap-based ETF range. The suite of products includes the US$39 billion Invesco S&P 500 UCITS ETF, which is the largest swap-based ETF in the world. This latest launch also expands the firm’s equal weight offering, adding Invesco S&P 500 Equal Weight UCITS ETFs to Invesco Nasdaq-100 Equal Weight and Invesco MSCI World Equal Weight UCITS ETFs.

ETF details

¹GBP shares are also available on the LSE (BBG ticker: RSPB), EUR shares on Xetra (RSPS) and Euronext Milan (RSPS), and CHF shares on SIX Swiss Exchange (RSPS).